In this solo episode, Jason Hartman discusses the 12 Days of Christmas with adjustments for inflation. He shares his thoughts on the second pandemic stimulus and on investments that do not produce income. Jason also answers questions from live viewers and talks about the average US home price and double arbitrage.
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Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in 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. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:05
Well, what do we have here, everybody, we have a Christmas Eve, broadcast for your Christmas Eve, Merry Christmas to all. And we have something really special, you’re gonna like it, you’re gonna like it. Because we talk a lot about inflation, one of the three major economic maladies. And when we talk about that, we should adjust the old days of Christmas. for inflation, yes, the 12 Days of Christmas, adjusted for inflation. So we’re not gonna go when we talk about turtle doves and Five golden rings, we’re not gonna talk about nominal dollars, we’re gonna adjust for inflation. And consider the 12 Days of Christmas in real dollars, the only way anything should ever be considered. So Merry Christmas to all and let’s get into it. But first, I don’t know, I need a little more of this tune. It’s so catchy. So what do you think those things all cost adjusted for inflation? What do you think those things cost in today’s dollars? Not in the old dollars, not when the song was written. Which by the way, when was the song written such a great song? It’s such a catchy tune. post below, comment below and tell me what your favorite Christmas carols are. Chad says Merry Christmas. Merry Christmas, Chad. Thanks for joining us. And this, by the way will be today’s podcast episode. So I figured I should do it live. Because visually, there’s a lot to show here. So let’s get into it. Let’s get into the 12 Days of Christmas adjusted for inflation. But first speaking of inflation, The Wall Street Journal yesterday published the average us home price Not to be confused with the median price. They’re usually not that far off. But they could be you know, median and average are different. There are those who don’t know that, which is pretty scary. But the average us home price was 14.6%. higher than the price the same time last year. Yes. People been making a lot of money in real estate. What happened to the crash bros? You know, all the folks saying the markets gonna crash. I suppose they’ll be right eventually. Because, hey, a broken clock is right twice a day, isn’t it? It’s true, they will eventually be correct. Peter Schiff will be correct. someday. It may not be in our lifetimes. But someday, he will be right and all the other human bloomers will be right to. That’s the way it goes. But hey, the 12 Days of Christmas.
Well, before we get into that, we got a contest coming up because I guess Trump vetoed the stimulus bill. I did a whole rant about that on the podcast a couple of days ago. And what a complete epic scam it was. And I tell you, even if you hate Donald Trump, you got to check your beliefs and your ego on on the Trump hatred because that guy has made tremendous personal sacrifice for the country. And now he’s going to get tons of hate, because he wants you to get $2,000 not $600. So he might stand in the way of you getting $600 next week, but maybe you’ll get 2000 dollars instead, which would be much better. You know, we can send $10 million to Pakistan for Gender Studies, or we can give the American people 2000 bucks instead of $600. Well, not exactly. Because if you do the math, you get the idea. It’s the sentiment that counts. I’m being sentimental. It’s Christmas. Okay. What’s tomorrow’s Christmas? But, yeah, can you believe all of that money going to foreign governments, corrupt foreign governments, instead of to the American taxpayers? Absolutely. Read Nicholas, read ridiculous. But that’s the way you have it with what’s called pork barrel legislation. No, good. And that’s why the President should have what Ronald Reagan wanted many years ago. And that is a line item veto, because then they could send the President 50. How long was this ridiculous bill? It was 5700 pages or something the longest bill ever, full of pork pork barrel legislation. And they could send them that. And then the President could just go through line by line and say, Nope, I’m not doing that. I’m not doing that. I’m not doing that. And whether the President was Republican or a hypocrite, I mean, a Democrat, they would really be held accountable. The president would, because they wouldn’t be able to have the excuse. Look, you know, we had to negotiate with Congress. And this is the best bill we could get. And, you know, the American people needed the money. And so I just signed, the president wouldn’t be able to get away with that any longer. And thank you, Chad, for posting that it was 55. I can’t make this up, ladies and gentlemen. 50 593 pages. Now compare that to the health care bill, Obamacare, you know, the one they passed it like 2am, on Sunday morning, or really Monday morning, Sunday night, whatever you want to call it. That was like 2700 pages. And that’s the one where Nancy Pelosi said, we got to pass the bill to read what’s in it. You know, you can’t make this stuff up, folks. But the fact is better than the fiction. So she said that, and that was ridiculous, of course. And then Dodd Frank came and the Dodd Frank come before Obamacare, no came after Obamacare. And Dodd Frank, the one that really, really made all these ridiculously stringent, incomprehensible banking rules and real estate rules and lending rules and all this kind of stuff. That was like 2200 pages, I believe. So it’s all ridiculous. It really is. But enter our contest, and you can win 500 bucks. Okay.
And I just want to let you in on a little secret here, folks. We are a small business. There will not be a million entries into this contest. So your chances of winning are actually quite good. Yeah, they are quite good. All you need to do is make a quick little simple video super easy. Tell us about your real estate and your investing goals for the new year and beyond. And, you know, you can throw in some other goals, health and fitness, professional goals, family goals, travel goals, leisure goals, new hobbies, new skills, whatever, all those goals, any goals you have, you know, throw them into your video just for added flavor. Or if you don’t think there’s enough to talk about as far as real estate and investing and in your financial growth. We help you create wealth here. That’s what we’ve been doing for many, many years. And yeah, just go to Jason hartman.com slash contest right now. open another browser tab. While you’re watching me, go to Jason hartman.com. Slash contest and enter in you could be one of the two lucky people that win 500 bucks. And again, I’m gonna tell you, your odds are good. There will not be many entries. Okay. So, you know, we our reach is limited. We only have like seven listeners to the whole podcast. There’s hardly anybody listening. I’m just kidding. We have a lot more listeners than that. We have listeners in 189 countries. So when you’re 500 bucks, just go there Jason hartman.com slash contest. And let’s talk about inflation because we’re going to talk about the 12 Days of Christmas, adjusted for inflation.
Alright, so first, and if you followed my work for any length of time, you’ve heard me talk about some of these things. But every time I talked about it, you know, there’s a new distinction that you make. So keep on listening, and if you’re new, I’m going to tell you where you can get a lot more information, a lot more background on all of this stuff. But to understand inflation, we need to understand the difference between real and nominal between price and value. They are not the same thing. Nominal means the name of something in name only is the actual definition of nominal. So it’s just to name $1. Bill is called $1. Bill, it was called $1. Bill 30 years ago, but the value of it is lower today than it was 30 years ago. Right? So nominal and real, very different. Inflation is this insidious, hidden tax that destroys our purchasing power of anything, including these things? for calling birds, Three French hens, to turbo bows, or a partridge in a pear tree, see any of those things? Oh, this one, I like this one the best. This is the best one. Golden breeze, for French, turtle doves, And a partridge in a pear tree. What does inflation do? It destroys the purchasing power of everything, including for French hands, to turtle dives, Five golden rings, and partridges and pear trees and everything else on the list. So we’re gonna get to that in a moment. But thankfully, it destroys the value Well, not thankfully, on the first things, it destroys the value of our savings, our stocks, or bonds and our equity in real estate. But thankfully, it also destroys the value of our debt. And that makes us richer. So it’s a good thing. It’s a really good thing. If you get it working for you, instead of against you. It is the most powerful method of wealth redistribution, ever. Not taxation, but inflation, much more powerful way to redistribute wealth. It redistributes wealth, from lenders to borrowers, because borrowers pay the loans back in cheaper dollars. And it redistributes value or wealth from old people to young people. It’s an intergenerational wealth transfer mechanism. All right. So here is an example. Because I’m going to fly through this so fast, your head will spin.
Hey, wouldn’t it be cool if I could do like an exorcist movie? Oh, that was a scary movie. shouldn’t talk about scary stuff on Christmas Eve like that. But anyway, and Linda Blair, spinning her head around. That was freaky. All right. And I don’t want to see that movie. Again. By the way, I saw it years ago, don’t need to see it again. All right. So say, for example, you are really smart real estate investor, you went to Jason hartman.com. you clicked on the Properties page, you contacted one of our team members, and you purchased 10 properties. And those properties cost a whopping $120,000 each, because we do have some cheaper properties like that. And you got a million dollars in mortgages against those properties. And then say you waited one year or two years or three years or whatever, you enjoyed your positive cash flow from those properties. You enjoyed your tax benefits from those properties. You enjoyed being a landlord, and you know that this is creating wealth for you. But guess what else? Let’s assume that those $1 million in mortgages or interest only mortgages, meaning you paid zero principal, they were not amortized. Oh, Sara says I sing like her. Oh, Sarah. I’m guessing that’s not a compliment. But duly noted. Because God did not give me the gift of singing, unfortunately, because I actually really do like to sing and I love music. And I’m going to drive to meet some people to get Christmas started here. I got about a three and a half hour drive ahead of me. In my semi self driving car, an amazing tech, technological game changer for real estate. I’ve talked about that a million times on the podcast. And if you don’t know how that’s going to change real estate, it is a game changer. Massive game changer, my semi self driving car, but soon they will be fully self driving. I’m going to drive that about three and a half hours or it’s going to drive me and I’ll see if I can get some music in and do some singing. Hark the herald angels sing Glory to the newborn King. I like Hark the herald a lot. That’s a really good Christmas Carol, but the 12 Days of Christmas, that’s good too. So we’ll get to that. So inflation comes along, you’ve got these this million dollars worth of mortgage debt. Inflation comes along. You’re paying interest on So you haven’t paid the loan down at all, or the tenant has it, because really, the tenant pays the loan off for you. And after that 10% inflation comes along in real dollars, you only owe $900,000, not 1 million. So inflation has paid off $100,000 of that debt. And that is awesome. Yes, it is. It’s totally awesome. And I demonstrate this example, in many podcast episodes, where I go over a real life example, not a theory of somebody. And there were millions of people who did this, of course, who bought a house in 1972, for $18,000, in change, they were paying 7.37% on their mortgage. And they lived there for three decades, for 30 years. And guess what happened? They actually got paid to live there, because they got paid to borrow that money. And I’m not going to tell you all about that now, because we don’t have time because we have 12 Days of Christmas to cover folks. And we got to inflation adjust each of these things. And it’s going to take a minute, but I have a resource for you. If you’re new to my incredible work. On the back here. Yes, someone’s got to say it, someone’s gonna say it. Well, actually, you guys say it all the time. And thank you. Because that’s why we do what we do. Because we love hearing that it impacts lives and it changes lives.
But if you are new to our work, or you just want to review the fundamentals, and of course, today is Episode 16 123 1623, you might be saying to me, Jason, I got to go back and listen to 16 122 episodes of your podcast. I’ve got good news for you folks. Many people have listened to all of those episodes, even two times, or three times, they have told me and the reason they were able to stick with it is because I almost never, almost never on any of those episodes sing. Only today, am I singing and maybe like one or two other times, so it’s really quite tolerable. You can just listen. So if you want a short version, you can go to Jason hartman.com slash start, or on any podcast platform, just look for my quick start Podcast, where we’ve hand picked some of the sort of fundamental episodes for you some of the core content, not all of it can never pick all of it out of so much work. And you can you can get a little faster orientation to our work there. Of course, if you need us, you can reach out one 800 Hartman if you’re in the USA, that’s only a US phone number. And or Jason hartman.com around the world or even at the International Space Station. It even works there. Astronauts, you listening. Okay, so for 37 years, PNC has been indexing the 12 Days of Christmas, and I thought I’d share it with you because I love what they do. You might be a customer of PNC, you know, their big, big organization, a friend of mine works for PNC in New York City right there in the Wall Street area. And anyway, they they’ve been doing this study for almost four decades now. And they’ve been indexing the 12 Days of Christmas for inflation. So you can go check out their website, PNC, of course. But I’m going to give you the abridged version with my sometimes brilliant, sometimes ridiculous, and sometimes hilarious commentary. snarky, always, for sure. It’s going to be snarky. Okay, so a partridge in a pear tree. Now, here’s the funny thing, folks. The partridge in a pear tree. And many of these other of these other things you’re going to notice, there’s no inflation adjustment. Why is that? Well, because the partridge in a pear tree remains unchanged. Okay, since 2019. So there’s been no inflation in this particular commodity. But some of the things we will discuss as we go through the 12 Days of Christmas, some of them you will discover can’t be obtained. We live in a plan demick era COVID-19 84. You can’t even get some of this stuff anymore. So they don’t know how to adjust it for inflation. So you’re gonna see that as we go through all 12 items, all right.
So they say PNC says, Well, well, 2020 was anything but predicted. Double the Partridge sheltered in place, right a lot of us at the shelter in place right. As the price Freeman is pear tree remains unchanged, zero inflation. Let’s go to the next one. Okay, how about Two turtle doves? Well, they got a lot more expensive. The Two turtle doves are way up, you’re gonna pay 50% more 50% more. Okay, that is just from last year. So turtle does expensive. Now, one of the takeaways here is not just about investing, but it’s also you know, it is Christmas Eve, and you might be thinking, wow, you know, I’m in big trouble, because I didn’t buy a gift for my true love. So, you know, maybe don’t buy 12 things. But if you want to be a smart gift buyer, you want to buy the things that haven’t had any inflation, right? Like a partridge in a pear tree. Because the same as last year, and maybe last year, you had a different true love. You know, you might have changed your true love. You’re over here, just like inflation changes year over year. And here you’ve seen no inflation. I don’t know that wouldn’t be very thoughtful to buy your true love this same gift you bought your other true love, right? That’s probably not gonna go over well, especially if one of them finds out. Yeah, you’re gonna be in trouble for that one. Okay, so, so the turtle doves are up. 50% Turtle bugs are getting expensive. How about Three French hens? Well, they’re up a little bit, but not as bad as the turtle does. Okay, the Three French hens are up more than the price of housing. Okay, because we just went over that. And how much was that up? Well, that was up. Let’s go back. There it is. 14.6%. Well, Three French hens are gonna cost you more than that, aren’t they? Yes, they are. Let’s go back to the French hens. Oh, there we go. 13.7% increase in price for the Three French hens. Okay, how about Four calling birds 0% increase, you can still get those Four calling birds for the same price as last year. Now remember, this index does not show you? Well, at the end, I’m going to show you a chart that will show you this. But each of these is just year over year. Right? It’s not going back 37 years to when they started the index for the 12 Days of Christmas. But this is just you’re over here. Okay. All right. How about Five golden rings? way up. 14.5%. Now, you might be saying, well, Jason, what about gold as an investment? If you follow my work, you’ve heard me talk to talk about golden Sara saying talk about silver. Precious metals, overrated, highly overrated. I’ve told the story many times before, but I’ll just sum it up to say this look, if you could rent out your gold, and it would produce income, if you could mortgage it for three decades at artificially low interest rates. If you could get great favorable tax treatment, then I would be a gold bug. But you can’t do any of that stuff. That’s why income property is the most historically proven asset class in the entire world. Because it is a multi dimensional asset class. Gold, silver, platinum, palladium, Bitcoin, Ethereum, any other cryptocurrency any of this precious metals? one dimensional strategy one dimensional, the whole game is simply buy low, sell high. That’s the whole game. Okay. And even if all the theories are right, about fiat money, and inflation, and currency collapse, even if all of that is true, it’s a one dimensional asset class, buy low sell high income property.
On the other hand, you’ve seen me put up the acronym about ideal, of course, but it’s multi dimensional. I mean, think of there are so many ways you earn your return from income property. Unlike Five golden wings, you don’t get it from those things right. You don’t get it from gold. You don’t get it from precious metals, one dimensional asset class income property. You’ve got cashflow, appreciation, depreciation, meaning a tax benefit. You know, you’ve got all of these things. You’ve got my trademark philosophy, inflation induced debt destruction. Which we so quickly touched on in this little quick episode. But it’s there. Okay, inflation induced destruction. Go to the podcast find out more about that because it’s the hidden wealth creator with income property. Okay, so Five golden rings is up. Inflation shows a sign of inflation, we’ve been printing money like crazy. Remember, when money is created out of thin air or currency, the more accurate term when dollars, yen, Euro, whatever are created out of thin air, all that already exists becomes less valuable. Remember to value drivers for anything. scarcity, and utility, scarcity and utility are the two value drivers for anything according to yours truly. Okay. So Five golden rings is way up. Now Six Geese a Laying. That’s up more than Five golden rings. I mean, this is up 35.7% of you gold bugs, you would have been much better off, you would have been much better off buying Six Geese a Laying than Five golden rings, you would have been up 35.7% Now the problem is of course you can’t you can’t finance those Six Geese a Laying over three decades with an artificially low fixed rate mortgage. I don’t know if the geese Elaine give you any tax deductions. There are some sort of odd farm laws. Somebody might. Hey, by the way, folks, there’s a whole bunch of you watching. I see you, I see you. We’ve you’re watching on eight different Facebook pages and one YouTube channel. And you got to tell me where you’re watching from, type in the location and type in what you want for Christmas. Okay, or type in any of your goals for the new year. All right, because that’s what our contest is about. And the link for the contest is scrolling across the bottom of your screen to win 500 bucks. And again, I want to say not a lot of people enter the contest. So your odds are good. There will not be 1000s of people entering. We’re a small business. You folks listening like if all of you watching right now, or all of you listening on the podcast entered the contest, you would have a very good chance of winning 500 bucks. So do it. Okay. Six geese a lane so far performed pretty well. That was a good asset class don’t. Okay, how about Seven Swans a Swimming? Well, no inflation in Swansea swimming. Okay, even seven of them. You know, your true love would pay $13,125 to buy them all in 2020 and that was about the same as last year. So 0% inflation in Swans a Swimming which, by the way, Swans a Swimming are surprisingly expensive. I had no idea they were that expensive. Okay. Wow. All right. Well, how about Eight Maids a Milking? This one’s funny. So as the federal minimum wage remained unchanged, so does the cost for the eight needs of milking. holding steady at $58. This year. These lady labor’s are happy to oblige, assuming social distancing practices are in place and face masks are aplenty this holiday season, folks. Oh, they’re entertaining.
I mean, these guys, they’ve done a really good job of creating this index and, and making it making it timely and entertaining. Okay, so so your Eight Maids a Milking? I guess you’re only buying for an hour. Right? So yeah, what is that? 58? Eight times eight? Is that what they’re doing? Or something like that? Or what’s what’s the federal minimum wage now? 825 maybe or something? I don’t know. Anyway, do the math. So there you go. I guess they’re saying they’re hiring for to milk for an hour. Okay. But you know, really, you do have to have some cows for them to milk, some equipment. And I would argue that probably all of that went up in price. So there’s probably some hidden inflation there in the index that you’re not being told about. Okay, so remede isn’t Edinburgh, Scotland? Oh, I love it. I love that accent from Scotland. So we meet That’s awesome. You know, I have been to England but I got to go to Scotland. I’ve been to 87 countries and I’ve not been to Scotland. Now some would argue that Scotland is not a separate country. I guess. That was a referendum you had recently, but we’ll see what happens with it. I think that has to happen in California. The Socialist Republic of California needs to split up into three states, three states, that would be better, because then maybe you’d see some rationality and some competition for governance. Okay. And Sarah is in Maryland. Ching Yes. Sara to Ching. And, and Jill is in Buffalo or I think you’re in Buffalo. You’re asking me about the buffalo real estate market. I don’t think it’s great in Buffalo. You know, I used to live in Rochester as a little kid. And I you know, I’ve been to Buffalo many times. My grandparents are from upstate New York. You know, that’s just not where the action is, you know, in those cold, cold, bitter cold climates, you want to be down further, you know, changes in latitude, changes in attitude, be in the south. That’s where all the southeast, that’s where all the business friendly markets are. Go to Jason hartman.com slash properties. By the way, we’ve added a whole bunch of new markets to the website at Jason hartman.com slash properties. So check those out bunch of new markets there and more being added over the next week. Alright, so key to lifestyle is in Raleigh, North Carolina. That’s a great place. I love Raleigh, North Carolina. Omar is in Bend, Oregon. That’s a beautiful place. Ben is very, very nice place very popular. And, boy, you’ve had some good run up in your real estate prices there too. So that’s good, good stuff. Scotland is merely a nation within the UK. You should visit It’s beautiful. Yeah, I know. I agree. It’s definitely beautiful. I’m I gotta I gotta get there. We got to get traveling back. Traveling has to come back. Okay, so we went over the Eight Maids a Milking. Let’s move on. Now, here is the problem. Nine ladies dancing, not available in 2020. You can’t even buy it. Right? Because there’s all these restrictions due to COVID-19 84 1984. It’s not 19th like George Orwell 1984. Which you know, if you have time, read the book. watch the movie over the holiday watch. There’s several movies about George Orwell’s 1984 that you must see because we are living through it. Maybe you don’t need to see it because we’re living through it. Okay. All right. So as COVID-19 has caused the curtain to drop on most live performances, the Nine ladies dancing will not have to dash through the snow to entertain in person. Advocates for the arts are not out of options for the performance lover on their guest list as virtual performances provide a pandemic proof alternative for audiences. So you can’t adjust the Nine ladies dancing for inflation because it’s just not available.
All right. How about 10 Lords a Leaping. not available. not available. You’re out of luck there too. So you can’t adjust those for inflation either. 11 pipers piping, definitely not available because out of their pipe will come droplets. You know now we’ve all learned about this stuff. And, you know, even when this whole plan demmick ends. Do you think we might be kind of like grossed out and germaphobes I think everybody’s become a germaphobe now, right? Which, by the way, probably, we could use a little germophobia I think so. Little more germophobia maybe not more than now but more than before is appropriate. But yeah, no, no pipers piping. Because of their piping. All kinds of droplets are coming out of their, their horn their pipe. And hey, no live performances, so you can’t even get it. So no inflation adjustment on pipers piping, and drummers drumming. You can’t even get 12 drummers drumming, because now you could get one drummer alone drumming, I suppose and watch him on zoom. But yeah. So you’re out of luck there too. It’s gonna be really hard to do the index this year and adjust things for inflation on the 12 Days of Christmas. Okay, so here is the true cost of Christmas in a song. But remember, a lot of the stuff you’re not going to be spending any money on because you just can’t buy it at any price. It’s actually down 38% $105,561.80 is the total cost of the gifts for your true love when you count each repetition of the song now See, that’s interesting, by the way, that’s like government math. It’s got a multiplier effect. Okay, it’s like Now, the thing I want to say is it’s more like fractional reserve banking, or fractional reserve lending, because it has that multiplier effect, right? So every time they lend out $100,000 there’s a multiplier because remember something and this is very hard to comprehend. It took me really years to kind of get this. Now. You understand, there’s a difference between I sort of getting it intellectually, and getting it like, viscerally right? I guess that’s not visceral. Lower is visceral, right? You know, getting it in your gut, right? Where you really kind of like have a deeper understanding of it. So money is lent into existence. That’s the way our system works. Money is lent into existence. For more on that, listen to the creating wealth podcast, wherever you get your podcast, and we talk about that extensively. And you’ll really learn some new stuff. So anyway, that’s what the on the index, but this is what I really want to show you. I want to show you the chart. Okay. And again, this is from PNC. This is the Christmas index through the years. Sorry, this is a little bit blurry. But it starts at 1984. We’ve been talking about George Orwell in 1984. Okay, and it goes, you know, here we got some inflation, the index started, it was about $20,000 to buy everything in the index. And remember, that’s including all the repetitions of saying it over and over, right? Because in song, they repeat all of them before each time they do a new one. Okay. So then, you saw we had definitely some inflation here. And it was about $25,000. And then it came down. And then I just want to make sure I’ve got the years right there. That’s why I was looking at the screen. See, my screen I’m looking at is over there, you could probably tell, is that the right way? No, it’s that way. Oh, see. I don’t know. It’s not the same for you as it is. For me. It’s too complicated for my dyslexia.
Okay, so. So here we see it go down, and things got cheaper, and then inflation hit again. And then there was another little dip. But then we went on this rampant inflation craze, remember, here is here is this sort of the end of the Alan Greenspan era. We go into the Bernanke key era. These are who was the chairperson of the Federal Reserve, we have the Janet Yellen era. And then, of course, we have our rich uncle Jerome Powell. Right. And, and we’ve seen massive, massive Money Creation during this time that we’ve seen all this inflation, no surprise there, the more money they create of thin air, the more inflation we’re going to have. But now, we have actually seen a lot of inflation, but we saw a decline in the index. Why is that? Well, it’s because some things just can’t be purchased. So they’re not counted. Because he can’t buy them at all. reviewing what you can’t buy. You’re not gonna buy 12 drummers drumming, they’re not available, or 11 pipers piping, or 10 Lords a Leaping or Nine ladies dancing. But you can get your Eight Maids a Milking. And I think there was one other thing you couldn’t even buy anymore. Right. So there you go. Okay, so that is the whole 12 Days of Christmas for you. We just wanted to share that because I thought it was really interesting. And let me see there’s a question here. Okay, Pamela, I’m thinking of selling my primary home in Vallejo, California, near Oakland and buy properties around the country. Is that a good idea? Well, as long as you buy the right properties around the country, and you get this fantastic three decade long, fixed rate debt, Pamela, I think that is an excellent decision. And I don’t know what the price of your home in Vallejo is. But it’s in California. So I’m sure it’s kind of expensive. Everything in California is expensive, and Oakland is certainly expensive. So you could rent, if you have to stay in the Socialist Republic of California, you could rent a house for a much better rate than you can own a house there. Because remember, the higher the price of the home, no matter where it’s located, the more favorable the RV ratio, or the rent to value ratio is for the tenant. Okay. So that’s why you want to do what I call double arbitrage. Okay, you want to basically rent an expensive home for yourself now, you know, the question is, compared to what, what does expensive mean? Now, that varies by market. But I can tell you this, for sure, Pamela, that if the house is over 350 or $400,000, it really really becomes a better deal to rent it than own it. Because the rent to value ratio starts to really fall off the cliff in favor of the tenant and not in favor of the landlord when you get to about $300,000. Now that number used to be lower, it changes over time, because if you would have asked me that question 10 years ago, I would have said 250,000, but I’m adjusting for inflation, just like the 12 Days of Christmas indexes. Okay. So yeah, keep that in mind. But generally speaking, you’re going to be much better off having a lot of inexpensive rental properties that are Other people rent from you at a favorable RV ratio or rent to value ratio for you, Pamela, and an unfavorable RV ratio for the tenant. Okay, you know, those less expensive homes just have much better economics, and they’re much less risky and you’re going to be diversifying your risk. And remember something else. This is a good question that Pamela asked, because you got to always remember another thing, your home is never ever, ever an investment.
Now, does that mean nobody ever makes money on the home they live in, of course, not. That they, they get lucky, their house goes up in value, they make money, great. But you can usually do better on the low price rental properties. Remember, in order my definition of an investment is that it produces income, if it does not produce income, it’s not an investment. And of course, your home does not produce income. So it can never be really considered an investment. It always has to be considered an expense, okay? Your home always has to be considered an expense. So you always have to consider your home and expense and not an investment. Okay? Okay, so I’ve got another one from Buddha Hill Ranch, Idaho. Let me get back to that one. I just put the contest link in the in the chat. So that depending on what platform you’re watching, that should appear. So Buddha Hill Ranch, Idaho says, We are in a deflationary environment, not inflationary debt to GDP studies, studies show that the higher debt loads are massively deflationary money supply does not create inflation, we need velocity. Also, I agree with you that we need for velocity, but I disagree with you about inflation or deflation. And, look, I’m not gonna have time to go into this now. But I have studied this extensively for almost 20 years. And we talk about this ad nauseum on the podcast, I interview tons of experts, I know what the consumer price index says. And I know they manipulate the consumer price index in three major ways weighting, substitution, and hedonic indexing. And all of those things artificially suppress the CPI. Okay, to make it inaccurate, and there’s a very big incentive for the government to manipulate the consumer price index and make inflation seem lower than it really is. Why is that? Well, because, of course, all the government entitlements, and the government salaries are indexed to inflation. So it costs the government more money. And also, generally speaking, it makes the populace upset, right? The voters don’t want to hear that there’s a lot of inflation, right? That’s not good for their standard of living. And then if you look at asset inflation versus consumer price, inflation, those are dramatically different, dramatically, dramatically different. So asset prices have skyrocketed, there is massive, massive inflation in assets. One of the things I’ve talked about this, my own theory that I’ve talked about many times on the podcast, is that there is a huge knock on effect to asset price inflation. And that knock on effect comes in the form of an entire generation or two generations. And I’m talking about millennials and Gen Z’s that are, to some extent, left out of the investor class, due to high asset price inflation. Okay, now I get it that electronics become cheaper, you know, this is called progress. And it’s all hedonic Li indexed to make it seem less expensive. And there is some logic behind that. But when they had gone ugly index, inflation, what they’re saying is we are not entitled to progress.
You know, think about it, if they had the consumer price index, back in the day, when Thomas Edison invented the light bulb, and the light bulb changed the world. And it changed so many people’s lives. What if they hit a dynamically indexed candles versus light bulbs, or hedonic Li indexed old, you know, those old lanterns with kerosene in them, you know, the, the kind in the western movie that always gets thrown into the hay and the fire starts, right? If they endodontically indexed candles or kerosene lanterns, versus the light bulb, light bulbs would be free. In fact, you would be getting paid to take a light bulb, right? But that’s just not reality. So you know, I understand that inflation is moderate, if you’re not talking about certain things like food and asset prices, and energy is artificially, artificially cheap right now. There’s a lot more in In the system, and, you know, we can agree to disagree on this, of course, like you said in your comment, so thank you for that. And that’s fine. This stuff is very nuanced. And it’s very complex. As we both know, you know, if you’d like to come on the podcast and you’re knowledgeable about this stuff, it seems like you are from your great comments. I’d love to talk to you about it. Because, um, you know, these are, these are just fun topics to talk about. It’s like my hobby. I love this stuff. I love it. I love it. Let’s see what else here as we wrap up, we’re gonna wrap this up. Our our says, What if the home is the duplex and the tenants are paying your mortgage and utilities? Well, yeah, but the question is, are are is, what is the opportunity cost on the half of the duplex you live in, and you’re not receiving income from so you have to consider that an opportunity costs. So there’s always an expense, it will always cost money to live somewhere. And you know, you’ve got to just get that home you want at the lowest possible cost. And it might be half the duplex. I don’t like the idea of living next door to my tenant, that’s for sure. I definitely don’t like that idea. But you know, if you’re okay with that, then, you know, just understand the rent you’re not getting is your cost of of that home. Okay. Jerry says Merry Christmas, Jason and team or et al. Are you a lawyer? That’s the way lawyers write. always enjoy your podcast and YouTube and your live cast. Hey, thanks, Jerry. Appreciate it. And Merry Christmas to you, too. And Jill says, What do you think? Does technology gonna change the market in the coming future? The housing market? Well, every technology influences the housing market. I mean, just, you know, the means of builders and developers and property managers, managing their supply chain and realtors managing their supply chain and, and better data and software. You know, it was said that software is eating the world. Right. And it’s true it is. And it’s amazing. No question. So, yes, there are impacts everywhere. But the one impact they really haven’t been able to disrupt is is construction. It’s still it keeps getting more and more expensive. And you know, for all this talk about 3d printed homes and all these new technologies, I have yet to see any of them actually come to market. I’ve been hearing about them for 15 plus years. And still, we’re seeing much higher construction costs, and very little technological innovation in home construction.
On one of my podcast interviews, I remember the guests that I was interviewing, he said the biggest disruptive technology in homebuilding is, are you ready for this? Are you ready for this? I’m gonna get a sound effect for you. Here it is the big disruptive technology in homebuilding is a nail gun. Wow. So you don’t use a hammer. You got a nail gun, right? Oh, wow. Big, big, big technological disruption, right, folks? Not so much. Not so much. Okay, with that, I will leave you with the 12 Days of Christmas song on the way out and just want to wish all of you you don’t celebrate Christmas, Happy Holidays, whatever you celebrate, but since it is Christmas Eve, this is appropriate. And there is the index of the 12 Days of Christmas. Hope you enjoyed it and wishing you all the best and happy investing. Six, Five golden rings for Three French hens to turtle. Okay, bye, everybody. Merry Christmas.
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