In this solo episode, Jason Hartman talks about self-liquidating debt, the shortage that we’re currently experiencing, and inflation. He shares that the Federal Reserve doesn’t have the monetary toolkit to deal with supply-side inflation and outlines how this will impact the housing market not just today but in the future.
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 0:52
This is creating wealth Episode 1687 1687. I want to talk to you about something that is just becoming very acute. And that of course, is inflation. We all know it. We all see it. We’re all experiencing it. It doesn’t matter what Jerome Powell says, it doesn’t matter what Janet Yellen says it doesn’t matter what sleepy Joe Biden says. The fact is, it is here people see it, they recognize it, it’s everywhere. It’s kind of like people telling you about climate change, when it’s freezing outside, right? They’re talking about global warming, right. You know, you just you just know the reality of it because you experience it. It doesn’t matter what any report says it doesn’t matter what anybody tells you inflation and do stent destruction is a technique, a strategy that I’ve been teaching for about 18 years now. And it is really the hidden wealth creator with income properties. It’s also used in the corporate world in the world of leveraged buyouts on Wall Street. And with the LBO or the leveraged buyout, basically, what they do is they acquire a company, they acquire this company with debt, they saddled up with a lot of debt, and they use the company’s own cash flow its own income to repay the debt. And that’s what we call self liquidating debt, self liquidating debt that’s worth writing down. It’s worth remembering folks. Self liquidating debt. It is a beautiful, beautiful type of debt. Because obviously it does what it says right, it’s self liquidates, it pays itself back. And that is the beauty of income property and why it is the most historically proven asset class in the entire world. So this strategy, inflation into step destruction is more important than ever. Now, I’ve been talking about this for a long time. But folks, it has arrived, we have arrived at the time when this is hugely, hugely significant. So one of our clients, Kevin, posted this in our special group, our empowered investor, inner circle group, which by the way, you can join, reach out to us and find out more about that, by the way in the US, you can call us on the good old fashioned telephone, one 800 Hartman or worldwide at Jason hartman.com. Here’s what Kevin said. I thought this was a very astute comment and really appreciated him saying this. This was just yesterday, he posted this. He said the supply crisis and soaring prices are hitting housing markets and construction projects overseas as well, such as Europe, some of which have their unique challenges and reasons for this right hard times in the UK. In Germany. They’re calling it the biggest material crisis in six decades. 60 years. Sweden has the lowest timber stock, of course, it’s mills and the trees which are a crop folks trees like corn or wheat, or avocados are a crop right? They just take longer to grow before they turn into lumber but they are a crop just like anything else. Right? So, so all the tree huggers there can relax and you really should be hugging corn, hugs some corn, okay, go out and hug some corn or, I don’t know, maybe some avocado trees. I’m really a big fan of avocados. So hug some avocado trees. But as you do it, pick a couple avocados off and eat them because that’s what they’re for. They’re a crop. They are a consumable.
Jason Hartman 4:39
With trees, that lumber is made from nothing different. They just take longer to grow this crop versus the edible crops. Alright, so Sweden lowest timber stock in their sawmills in 20. In over 20 years, Holland is experimenting with 3d printed concrete houses. Now that’s not just Holland by the way. If you saw my YouTube video on that with I believe the world’s leading consultant we actually hired him. His name is Jared gross. And we hired him to consult with us. Because I was notice that was past tense folks. I was going to open and maybe I will in the future, but I put it on the back burner, a 3d house printing construction company. Yes, I was on the verge of doing that. And by the way, maybe I’ll eventually do it. But I found that this is just a lot of hype. The 3d printed houses are hype. It isn’t legit. It’s not here yet. It’s just not here yet. It’s premature to talk about 3d printed houses. Well, we can talk about them. But they’re not $10,000. No, they’re not so much cheaper. And guess what? made of concrete. There’s a shortage of that to folks. And guess what? Guess what one of the big ingredients of concrete is? And there is a big shortage of this thing that we all thought was abundant, and had tons of supply. You know what I’m gonna say? sand. There are sand wars going on, folks, the kind of sand you need to make concrete is sea sand, it’s ocean sand, the desert sand doesn’t work very well, because it’s too smooth. And it doesn’t, it doesn’t bind very well in the concrete. Right? So this ocean sand is in very short supply. And guess what? It takes a lot of fossil fuel running vehicles, dredging equipment, all of this stuff run by diesel to get it. All right. That’s the reality of it. And with the Paris accord, and so on and so forth, and you know, this green trees that have red roots, right, the roots, red, meaning communism, they’re using the environment is a way to implement all sorts of restrictive policies. So this is all very hard to get. And there are just shortages of like everything. See, for a while now, you’ve heard the pundants talk about what they call the everything bubble, right? You’ve heard that phrase, the everything bubble. Well, guess what? We’ve moved into the everything shortage. Yes, we are in the everything shortage. Interesting times we are living in he says and here’s the article he shared building crisis looms, as dwindling supplies bring sites to a grinding, halt, shortages, delays and soaring prices caused by Brexit COVID and the Suez Canal blockage are holding up projects across the nation. Now they’re talking about Britain. But this is certainly true in the US. And all over the world. When I was touring around Sarasota, looking at, I looked at so many properties, my head is still spinning from that. But you know, I’m sort of used to that, because, hey, that’s what I do. I look at properties, right? I love looking at properties. And it is unbelievable, the way these builders who have what’s called entitled lots, okay, that means they’ve got the dirt, the utilities have been run to the dirt. So they’re not only entitled watts, they’re what’s called finished lots. So the utilities have been run to the lot. And that is a ready to build lot. But guess what, they’re only releasing two, four, maybe six houses a month, because they don’t have the materials to not only finish the house, but the materials to start the house. Look back through history. You know, there’s the old saying, those who don’t learn from history are doomed to repeat it. And on the podcast, I’m always recommending that people watch old TV shows, watch old movies, read old books, listen to old music, and really get in touch with the past. Without a sense of history. You can not have a sense of the present or the future doesn’t mean live in the past because if like Denis waitley says one of my my main mentors at age 17 Denis waitley, Jim Rohn, Earl Nightingale, and Zig Ziglar Denis waitley says if you live in the past, you become senile. But if you live in the future you’re on someday I’ll like an island. But spelled I apostrophe Ll like I will write he’s got a great poem that I’ve shared before called someday isle. And we’ve got to have a sense of history. So when you look back through history, just think about the times that people experienced massive shortages. I remember an ex girlfriend of mine telling me about her grandmother telling her stories of how during World War Two, when there was a shortage of nylon, women would take I think mascara, or maybe markers, I’m not sure. And they would paint a line up the back of their leg to make it look like they were wearing nylons, because they used to have the same back there. Right, which now they do sometimes just for style, but not for necessity, right. And so there were just massive shortages. You know, you couldn’t get things you couldn’t get cans, everything, there was this just big movement to recycle things. Because there were these massive shortages of rubber, of nylon of just all these materials, just shortages, shortages, shortages. And that was normal life. But in the modern era, we become so spoiled, haven’t we, we expect everything to be there. And our supply chains have become so efficient with one major thing. And you might know what I’m going to say called just in time delivery. So with this just in time supply chain, when there is one little kink one little disruption, and there is this domino effect created by that disruption, it becomes very, very disconcerting. So the the supply disruption is here, inflation is here, it’s hugely significant, not just because of the supply chain problems, but also because of bad monetary and fiscal policy, which some would argue we had to do to take these actions because of the pandemic. Fine. Maybe that’s true, maybe it’s not. We live in a world where people countries will just never take the hard medicine anymore. hardship is just unheard of. You can’t have hardship. So they’ve got to run the money printer, the printing press, and create all sorts of fake money out of thin air to paper over the problem. But eventually, as the saying goes that chickens come home to roost, don’t they? Yes, they do. They come home to roost. And we get into this situation where we have to pay for these activities, this money printing all of these policies. Look many of the policies we have, whether it be going to a university, and I’m not saying policies, but just social norms, right? government policies, social norms, fiscal policy, monetary policy, etc. All these policies and social norms, cultural norms are the luxuries of a rich society. And you can only fake richness for so long. You know, it’s like that that guy who’s the flashy show off who’s got the Ferrari and the boat and going out to fancy dinners and buying everybody drinks and all this stuff, right? That person many times is either a criminal, they’re a crook. And if you watch, CNBC is American greed. You know, that’s the common thread that runs through all of those crooks. They all had a fund where they raised money from somebody, right? They raise money from people, and they were all super generous, and they were all throwing their money around. Right. And a lot of people who knew them commented before the bust break before the chickens came home to roost. Oh, they were so generous, you know, they gave all this money to charity. They took people out to dinners, they took them out on their yacht, they wind people wined and dined people, and all this stuff. But that generosity was fake. It was generosity that was enabled by criminality. It wasn’t generosity that was earned. They couldn’t really afford to be generous through good deeds and legitimate work ethic in building a business that actually created value in the world that other people became customers of, and that value was created. And that was like good conscious capitalism. It wasn’t that at all, it was just greed. Well, on the flip side of that, when you look at governments and central banks, eventually, you can’t just print your way to prosperity, there has to be actual productivity. And productivity is created by people working and producing things like widgets, right? widgets are the economic thing that people have to produce, right? Whatever it is that good or that service that they sell into the marketplace. And it creates more value because that exchange happens by a person who would prefer to have the product or service over the money. And so they exchange value in the marketplace like free people and it’s, it’s awesome. That’s the way it should be. But that’s not what we have. You don’t have that at all. We have some Some of it, of course, but mostly in the world, like whenever you hear about the g7 industrialized countries or the G 20 industrialized countries, when you hear them getting together, when they have meetings, emergency meetings, you know, the all the countries get together at the United Nations, when they go to the World Economic Forum in Davos are now on zoom. All they’re really talking about is how they print their way out of the problems.
Jason Hartman 15:28
That’s one thing they talk about. And then the other thing they talk about is, how do we get more control over the population? lots of ways to do that. And all of these things are happening concurrently. And if you’re not scared, you should be scared because the technology enables a level of control over us that has never been seen before in history. It is totally first time first time so this article let’s look at it. It’s not simply higher prices and shortages. delays are growing too cold rolled steel Joyce okay so used in construction will take nearly five months to arrive compared with the usual six weeks in lag time. According to figures compiled by a Comm. V infrastructure consultancy for building magazine, MDF wood right MDF is super popular type of wood, beloved of interior designers on TV makeover shows, usually takes a week to arrive. Now it takes six weeks, six fold increase in timelag. Roof battens were usually held in stock by building merchants. But now there’s a month long delay. And the reason why Gary Morris builder traveled 150 miles to look for the same roof tiles is because the order time has gone from six weeks to a dizzying six months, six months. It’s not just construction output here that has recovered very quickly. Francis says global construction has as well. And that’s particularly the case in the US lumber prices in the US prices have gone up over 250% in the past year. So we see all of this going on all over the place. Now, here’s an email I got just today from Dan Ammerman. Dan Ammerman has been on the show many, many times he’s been on the creating wealth podcast, go look for his episodes. They’re very, very enlightening. Dan has some some great stuff. Okay. So here’s what his email said today. And I’m just cutting out some parts of it. It was rather long. He said surging inflation is currently hitting the United States. But it isn’t the kind of inflation that many people believe it is. Inflation can arise from a number of different sources. And money creation is only one of those sources. As I read here, certainly you will be able to tell when I’m reading, and when I’m throwing in brilliant, or snarky, or sometimes brilliant and snarky comments at the same time, because they can be brilliant and snarky. All in one serves double duty, sometimes the source of this particular bout of inflation is not money creation, but supply side shortages. Now, I would actually argue that it’s both because the money creation is definitely hitting the streets. It’s being sent right to people in their enhanced unemployment benefits. But here Dan is talking about the supply, what I call supply demand shock, which by the way, I was one of the first people to talk about this middle of February a year ago. supply demand shock. It’s one of the big things I talked about. I did a show with George gammon, where we talked about that in depth, very interesting concept. He’s talking about the source being the supply problems, right? He says, No, that doesn’t mean we will we won’t see inflation that results from money creation. But if we do, we will have two separate fundamental sources of inflation, that are multiplicative, in combination with potentially explosive consequences. There is another particular issue with supply side inflation. Now I want you to remember, good old Ronald Reagan. One of the best presidents we’ve had, right. Ronald Reagan used to talk about along with his adviser Arthur Laffer, who was the creator of something called the Laffer curve. And I had the pleasure of meeting Arthur Laffer when I was 24 years old. I wish I knew more about economics back then, because I really would have asked him some great questions and I got to get him on the show. I’ve had many super famous people from ron paul to Steve Forbes to his a zillion zillions of others, but not not Arthur Laffer. We got to get him on the show. Anyway, They talked a lot about supply side economics that was part of reaganomics and trickle down economics was the supply side or idea of supply side economics. So, Dan Ammerman here is talking about the supply side problem, but not as it relates sort of to the macro economic issue, but more as it relates, really to the supplies of actual materials. And look at the last sentence, the supplies have to physically increase, and the Fed has no ability to do that. Okay, so let’s move on here. So this creates a situation for the 2020s that is more complicated and more dangerous than is commonly realized. current government and political goals call for what is effectively inducement of supply side inflation over the coming years, though, restricting oil production that would look at that was one of the first things Baidu did, he cancelled Keystone? And then we’ve had this whole other problem with the hack of the Eastern pipeline. And that problem is clearing up rather quickly, which is nice. And these aren’t economic issues, necessarily, but it shows you how fragile the system is, doesn’t it? Okay, so restricting oil production, reducing pipelines, making energy more expensive, making labor more expensive, I think $15 an hour minimum wage, making cars and homes more expensive, and potentially raising the cost and reducing the supply of anything that requires the emission of carbon dioxide. Okay, so at the same time, fiscal solvency of the US government, and current investment prices are effectively based on the ongoing abundant dollar creation by the Federal Reserve. And you got the same situation, basically, in Europe and in many countries around the world. So we see physical supply shrink, we see an abundant amount of currency created currency units. And what do we obviously have? Well, we have the classic inflation situation, we have a limited supply of goods and services, and they increasing supply of currency units, chasing the goods and services. So what do you get? Well, every seller of all those goods and services is naturally going to say, hey, there’s lots of demand, my supply is limited. So I’m gonna raise the prices, da basic economics, supply and demand. There we go. So that’s what we have. Okay, so a couple things I want to just point out from this long email that I just grabbed here is he talks about shortages, driving price increases, there’s another particular issue with supply side inflation. Despite all of their public assurances, the Federal Reserve does not currently have and never has had the monetary toolkit to deal with supply driven inflation. The supplies have to physically increase. And the Fed has no ability to do that, just as we just said, super important. So he talks about gas prices, he talks about cars. And by the way, gas prices before the eastern pipeline, that wasn’t an issue. I mentioned food, building materials and so many other things and acute shortage of single family homes, has led to a 12.9% one year increase in home prices in the United States by March of this year, as measured by Freddie Mac home price index. Okay, a major contributor to the shortage. And the increase in home prices is the shortages of building materials and labor for building new homes with the price of softwood lumber climbing 120% in the year ending April of this year, so hugely significant folks, and more important than ever to implement your inflation induced debt destruction plan. Okay, fish fat says, Hi, Jason. I saw a legit housing solution that may be worth looking into. It’s called box double. Yes, I know that one. It looks promising. And I have signed up on their website. And I have actually asked my guest Booker to book them on the show. But guess what? They build essentially tiny houses. I believe those can be connected together to make larger houses. I can’t remember. They’ve got a neat solution, but it is not cheap. They think they’re gonna roll those out at 50 to $80,000. I believe. We’ll see if they can actually pull it off. I sure hope so. But these are tiny houses that calculate the cost per square foot. They’re not that cheap. None of these solutions are very cheap. Okay. So starpath Academy, you’re speaking the truth. My family went through hyperinflation in Romania. And the tunes I can hear sound eerily familiar. Yeah, I agree with you. And then you also say with rentals, I would say don’t buy luxury villas, if possible. Many families needed scale back, I agree with you, we recommend and help people buy through our network at Jason hartman.com. You can click on the Properties page, we help people by necessity level housing, the higher end of that necessity level housing spectrum, but necessity level housing, because you can always catch people moving up or down the socio economic ladder, and you can provide housing for them, and provide rental property for them, and then eventually resell your properties to those people as well. Okay, Brent says also turning my buyers away from new construction, because I don’t believe most builders timelines due to the shortages. Well, look, I agree with you there, that the builders are obviously facing delays, we talked about that. But some of these new construction properties can be a good bargain, especially. And this is becoming a rare thing, if the builder will let you lock in the price. And they don’t have a price increase clause based on construction materials, building materials prices, most of them do that now and they just have to, because they can’t afford to finish the house. If they don’t have that clause in there. Okay. Savannah, Rei says I can testify to all this. I’m bleeding through house construction project started in January, materials are two to three times the norm, if they are available at all. So anyway, let’s wrap it up for today, folks, thank you so much for joining me go to pandemic investing.com. Get Your FREE Mini book there.
Jason Hartman 26:31
No strings attached, no credit cards, no, no shipping fee, nothing. It’s just delivered to you via email. And you’ll love it. It’ll really tell you how to deal with some of this stuff, and help you with that. So that’s pandemic investing, calm, the main website, of course, Jason hartman.com, where you can see properties and so forth. You can also reach out to us by phone at one 800 Hartman, thank you so much for joining me today. And happy investing. Remember, we’ve got a brand new podcast every Monday, Wednesday and Friday, and new videos on the YouTube channel on a regular basis as well. So reach out to us if we can help you with anything. Happy investing and have a great day.
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