On this Flashback Friday episode, Jason Hartman plays a recording from the 2014 Meet the Master’s event in Orange County, California. The topics range Bitcoin and its competing alternative cyber currencies, the Case-Shiller index, and reassessing rent-to-value ratios.
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This show is produced by the Hartman media company. For more information and links to all our great podcasts visit Hartman media.com.
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Welcome to the flashback Friday edition of the creating wealth show with Jason Hartman. As he rapidly approaches 1000 episodes of this podcast, he has hand picked individual episodes that he feels is going to be good review for you to prepare you for the future by listening to the past. Let’s dive in.
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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 Get 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. And now, here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:18
Thank you so much for joining me today. And today, our guest is none other than yours truly. That’s right. Jason Hartman will be playing a live introduction for a meet the Masters event and I thought that would be very much in keeping with a theme of our upcoming meet the Masters event in January that many of you have registered for so thank you for the onslaught of early registrations. And be sure you join that group see the people that come every year. They understand that you want to register early because you get the lower early bird pricing and the price goes up as more registrations filter into The early bird gets the worm the early bird gets the discount. So do that at Jason hartman.com. We are getting very busy planning and excellent. Meet the Masters event for you. again like I said on the last episode, I’ve kind of lost count because we used to do these twice a year now we only do them once a year. I think this will be the 16th meet the Masters event I’ve done I got to go back and figure that out. But anyway, here we go. So let’s dive in and listen to a live tape of me at speaking at meet the masters. In the beginning. I’m talking about my house dog Coco who’s there. She’s kind of roaming around she just looked at me when I said that. You should see this right now that was funny. That’s what I’m referring to since you don’t have a visual, but she was doing some funny stuff in the room. Let’s just dive in and listen to that and please register as soon as possible for our January masters event. Go to Jason Hartman dot COMM click on events, and you can get your tickets at the early bird price while they last. Okay, so here we go. Good morning, everybody. So we’re going to talk about a lot of great stuff this weekend. again tonight we go until 9pm. And, and so it’s a long a long day to day 12 hours after 9pm. We do have some optional activities. We have a firewalk shark dive, and the whole has a cool stuff like that, too, as I mentioned last night at dinner. So anyway, welcome and thank you all so much for coming. Let’s see who here is from the furthest away. We’ve got some East Coast people I know how many from the east coast. Okay. And how many from another country? Japan? Yeah. Okay. I remember when you registered. Thank you for coming such a long way. Yeah. Congratulations. Give them a hand if you will. We’ve had people come from Europe, the Middle East, and now now Asia too, and Coco was really excited about that, actually. It’s kind of neat to have a seminar with house dog. Who asked me? Oh, god, she’s amazing. One thing I will say about Coco, please don’t feed her anything is she’s a total scavenger. So if you drop any food, please just pick it up. And the other thing is just be careful. She’s still in that training stage where she kind of does jump on people a little bit. Be careful. She doesn’t like knock your coffee out of your hand or something like that. Okay, so just be careful. You have an idiot roaming around the room, and it’s not me. So, so anyway, okay, good. Well, let’s dive into it. I’m just going to talk about a little overview of last year, a couple of the big trends we saw happen last year, some of the big trends we saw last year, and then throughout the weekend, of course, we’re going to talk about a lot of forecasts for 2014 and what to expect from our income properties. So again, welcome. Really what we saw is the big three things that happened in 2013 that affect us as real estate investors. Our course we all saw a lot of appreciation last year. I mean, that’s a welcome change. Remember, you’re listening to flashback Friday. Our new episodes are published every Monday and Wednesday. But as you know, from following the podcast and coming to other events, I know a lot of you are regulars. And you come to a lot of events. So thank you for the support there. But as you know, from following my work, we don’t really invest for appreciation, we just look at appreciation as the icing on the cake. It’s great, you’re lucky I’d rather be lucky than good any day of the week. But unfortunately, you can’t depend on luck. You can’t, you know, really create it, necessarily. So that’s just icing on the cake. But we did have some definitely nice appreciation last year. So that was a welcome change. And it’s interesting too, because last night at dinner, I was talking about a chart that I’ve got to bring back because it’s a chart that I used to show a long time ago in like 2004 For 2005, and it was comparing Orange County, California where we are now my old hometown. And it was comparing it I pretty sure to Kansas City, Missouri, and this chart showed an 18 year period. You know, I talk a lot about linear markets versus cyclical markets, right? And how I used to be a cyclical market investor. And now I’m a linear market investor, because I think it’s just much more reliable and much more conservative approach. But it was interesting because Orange County being a very cyclical market with big ups and really ugly lows that are very devastating to people versus Kansas City, just kind of one of these linear markets that sort of chugs along. And as I recall from that old chart that I haven’t been presenting in years, it showed Kansas City, boring Kansas City, beating Orange County, California, exciting Orange County, California with literally, Orange County has seven television shows about it, voc Laguna Beach, Newport. Arbor. What are the names of the others Real Housewives of Orange County? It’s amazing, right? I don’t know, Kansas City. Do they have any shows? Okay, yeah. So So the point here is, is that all of these things that are like, big talk sexy, a lot of news, media attention. Those aren’t the places to invest. They’re really not the places to invest. So staying away from the sexy stuff, the siren song is or does that a Greek math, I think, right. Is is what you want to stay away from. So we saw some good appreciation and inflation, and we saw tapering as well. We saw the start of the Federal Reserve’s tapering, which there was a lot of talk about it for a long time. Well, it finally started to happen. And what is tapering, it just means a reduction in the money supply or reduction in in the creation of new money is what we should say, or new currency. And so we’ll talk about that. And then Bitcoin. How many of you have heard of Bitcoin daily? Don’t raise your hand. Really, Aaron? real money. Real fiat money not Bitcoin. Yeah, so I mean Bitcoin pretty amazing. A lot of news about Bitcoin, right? Raise your hand how many people know about it again? Yeah, most most of the room. Okay. So what we saw last year is an amazing new thing, really. I mean, this deserves attention and discussion of crypto currencies or cyber currencies, Bitcoin being the most popular of which, but there are many others out there. Okay. Litecoin. I think it’s the number two, and there’s a whole bunch of others behind that. And this is indicative of people becoming very suspicious of a fiat money central banking model that has been around with us for a long, long time. This is you know, last year was about 100 year anniversary of the Federal Reserve, which is the US has third central bank, and in that hundred years, the dollar from 1913 to 2013, lost about 97% of its value. So, you know, they’ve done a great job. Right. If you if you if you took $100 in 1913 put it in a, I guess Folgers was probably around 1913 I’m just thinking that’s one of those old companies, maybe not, but you put it in a Folgers coffee can bury it in your backyard, hopefully you held on to the property, okay, and then dug it up 100 years later, it would have been worth three or $4 you know, not as bad as Zimbabwe, but pretty bad track record, right. And so, we’ve seen people, you know, we’re seeing people all over the world losing faith in their governments and their central banks, which are obviously a very cozy relationship, and that’s a big deal. Okay. Now, is it an investment? I don’t know. I kind of doubt it. I will tell you my story of Bitcoin in just a few minutes here. Okay. asset prices let’s talk about asset prices and and just look at the urine review one fantastic asset last year now, it wasn’t as good as Bitcoin but I think Bitcoin might just be like tulips, okay, and be in a bubble. So we’ll talk about that. This asset was had an amazing growth rate. And the reason I mentioned it is because we talked about it last year, a year ago, January, we were in the same room. Many of you were here then. And we talked about this, this particular asset, it had zero losses throughout the year. And it had a 214% game. Any guesses? No, I wish. I wish I could say real estate performed as well. Any other guesses? No, Bitcoin actually did better. Modern art? No. That’s such an by the way art. I used to be a bit of an art collector and I still own all that stuff. And I’ll tell you something. Art is a total misnomer of a market if you ask me because it’s so illiquid. Things are theoretically have value, but who will buy them? It’s just trying to sell them. Just try it. It’s just so illiquid, it doesn’t even work. No 214% gain with no damage. Sometimes throughout the entire year so this was pretty much a straight up upward trend. And it was Coco. Yeah. You guessed her weight last year. Many of you remember we had that contest last year. And she weighed about 14 pounds a year ago. And by the end of the years, he weighed about 44 pounds. So that was a straight up gainer. Okay, so there she is last year at meet the masters. Hmm. But let’s get serious. So, the Case Shiller index, you know what I think about Case Shiller right. So I’ve talked about it on the podcast a lot. Case Shiller is the most commonly used index when it comes to real estate prices. However, the problem is that it profiles only 20 markets and of these 20 markets. I would dismiss 14 of them and not recommend them. Only six would meet our cash flow oriented, linear oriented conservative investment. Quality markets, the other 14 cyclical bubble markets. So what’s interesting here is this is the entire 20. It’s the Case Shiller Composite Index. Right. And it showed that last year we were up 13.6%. But what’s interesting here is if you look from when the bubble kind of started here in 2000, right, and it went up and up and up and then of course it had a horrendous fall the worst in seven decades. Okay, as we saw the worst economy in seven decades, and then you know, it started bumping around and then you know, last year we had some really nice gains. Again, the icing on the cake, the frosting on the cake, nothing we depend on just an extra bonus perk, right for investors. But the average here, if you just look at it like a straight line, 3.6% not bad when you leverage that. Because if you leverage that Now remember, one of the things we love about income property, it’s it’s a multi dimensional asset class and as such You don’t just act like a gold or a Bitcoin or a stock investor expecting things to go up in price, you get cash flow, you get tax benefits. You get all kinds of nice things along the way. So it’s a multi dimensional asset class. But let’s just look at it simply, if you were able, which you certainly were back in 2000, to put nothing down on a property, you could do that in 2000. That’s what led to the bubble. You could put 5% down, you could put 10% down. Okay, so let’s just take it at 10% down with 90% leverage. So you have a nine to one leverage ratio, that 3.6% and remember, that includes 14 cyclical markets, we wouldn’t recommend. So when you when you don’t have the big downturn, which you wouldn’t in the other six, but we Case Shiller doesn’t split it out like that, unfortunately, because they don’t look at things the way we do. So There, you would actually have done better because you wouldn’t have given so much back. And and recovering from a loss is very, very difficult. I mean, you know, just know that if, if your asset goes from $100 to $50, you’ve lost 50%. Right. But to get back to 100, you have to have a 100% gain. So that’s why it’s, it’s so important to just curtail losses, and ideally not have them at all, but to really minimize losses. And, and this is one of the problems you know, that obviously, speculators have when they invest in speculative things like metals, like Bitcoin, like, appreciating markets are cyclical markets, like orange county that have big depreciation, too. But the same is true of people that go to Las Vegas, right? As Kenny Rogers famously said, you got to know when to hold them and know when to fold them and know when to walk away and know when to run, right. People have a really hard time cutting losses. It’s just part of our human psychology, of just cutting losses and running and doing the next thing right They will usually write it down. Okay. Just a reminder, you’re listening to flashback Friday. Our new episodes are published every Monday and every Wednesday. Anyway, so so that’s one of the things here. But if you had leverage, that measly 3.6% it 10% you’d have a 36% gross ROI. Right? Not bad. Not bad at all. Talk about tapering a little bit. So Federal Reserve finally we’ve got a new Fed chair now Janet Yellen, as you all know, and she seems like another Keynesian another Greenspan Bernanke key maybe not as bad I’m not sure yet. She has the highest net worth, you know, a lot of this secret and you don’t really know what these people are worth, supposedly, of any Fed chair, at least incoming Fed chair have about $13 million, which it’s not that big of a deal, but it’s for that kind of position that pays $180,000 a year or something like that. It’s a big deal. So What this paper means is that instead of buying at $5 billion a month in bonds, which is just creating fake money out of thin air, that’s all it is. They’ve now cut this to 75 billion. So that represents about a 12% reduction in the creation of new money. That’s pretty significant. I mean, 12% is a significant reduction in one single step. So we’ll see what kind of effect that has on every asset class. Okay. And that’s, you know, another thing we’re definitely going to be talking a lot about this weekend. But but here’s an interesting thing in looking at the bond market now. Is anybody familiar with the author and media personality? Neil Ferguson, but his name is spelled like Niall Ferguson. You know him? Yeah, he is awesome. He has a great book. It’s called the ascent of money. And I’m just going through it for the second time now. And one of the things he says that the most powerful, the most powerful part of the financial system now This isn’t for investors. But it’s, you know, for overall power over the financial world is the bond market. The bond market is the world’s bully. And you’ve probably heard of the term bond vigilantes. And so now Ferguson talks about that a lot. And it’s pretty interesting. But so what happens here is, is this taper was announced, it pushes bond prices down, okay? And I’ll bring this back to what it means to real estate here in just a moment lower bond prices mean higher interest rates, upward pressure interest rates. So what does that mean for us as investors, higher mortgage rates cost of borrowing is more. So what does that do to the market it has the effect of cooling it right cooling the market down. And when you cool the market down if you have the same amount of the demand and the same amount of supply, assuming those things are equal, they never are exactly but you know, generally speaking, if you have that, it tends to put downward pressure on real estate prices. But remember, the cost to borrow is higher for you for me. For every would be homebuyer out there. So they may think, well, I don’t want to be a renter anymore, I want to be an owner. But now it’s more expensive to be an owner, because it’s more expensive to borrow. Remember, generally speaking about a 1% rise in interest rates, the price has to drop 10% to equal the same monthly payment. That’s very significant. So people buy a house, same way they buy a car, they buy it on a payment, not a price. They buy it on a payment. And we do that too. as investors, we look at the monthly cost. And one of the things that we’ve never really separated out before in our talking with you or on the podcast, is something we’re going to really tease out this weekend. And that’s the concept of utility value of a property being the rent you pay if you’re a renter, or the rent you get if you’re an investor. All right, so that’s going to be a big theme that we’re going to touch on a lot too. weekend, and how that differs from the price of the property, which is largely smoke and mirrors, especially in cyclical markets like orange county where we’re sitting. So that means higher rates, but it’s less of a motivator to buy. So what is the opposite side of that equation? Remember the law of cause and effect, right? For every action, there is an equal and opposite reaction. Well, if it’s more expensive to borrow, what happens fewer people invest and fewer homeowners buy. So if there are fewer investors, there are less rental properties on the market for rent. And if fewer homeowners go and buy, that means that they will continue renting so there’s more supply of renters so it has the effect of pushing rents upward. Problem is this. The rents react very slowly, too slowly. They just go up you know, they kind of flutter a little bit but they they go up over time, right? But But prices as Especially in cyclical markets can go way up and fall really abruptly. However, it doesn’t happen as much as other asset classes. Because as the I don’t even know if she’s still the chief economist maybe Michael would probably know this Michael risk now one of our investment counselors, Leslie Appleton, young chief economist for California Association of Realtors, that she’s still around. Do you happen to know? I don’t know. But she said something very valuable during the during the beginning of the downturn and I think she was right now remember, all of these, you know, National Association of Realtors chief economists like Lawrence Yoon, I had him on the show a long time ago, and people criticize me but I had bill airs on less time. So if you want to criticize me now You really have an opening. But how many of you listen to that one? wasn’t that good? Yeah, that was that was actually one show I actually prepared for first time. Yeah. Did you notice I had some like tough questions for him. And I gotta give him credit. He was he answered him. He was pretty he was pretty good. But one thing was the Appleton young said is, she said And this is this is valuable. She said real estate prices are sticky. On the way down, they don’t drop quickly, not nearly as quick as any other asset class that can have huge fluctuations. Why is that? Because their real estate is not very liquid. And remember something liquidity creates volatility. It’s interesting because I heard one of these talking heads on CNBC who most of those people I think are just idiots or their promoters, one or the other. But they were talking about how if a market is more liquid, it’s less volatile. The absolute opposite is true. The more liquid it is, the more volatile it is, look, you can trade stocks with a click of a mouse, you can’t sell a property like that. So that makes it more sticky. So it makes it more slow to react. So you have time to consider things and make decisions all right, okay. So, a higher rates, pull yield seeking or ROI return on investment seeking capital from markets. And what does that do? Well, it creates the sea of capital looking for yield. And a couple episodes ago on the creating wealth show, I talked about this, and I didn’t express it exactly in this way. But it’s really that last third interview with Harry dent that made me think of it, and it was okay. Jason, a lot of your strategy is based on inflation, you think inflation is coming? There are like three major economists that disagree with you. Most everybody else agrees that inflation is coming. And it will definitely come in a significant way. And that’s what I think. But the question is, even if we had deflation, there would be no place to get yield. You wouldn’t you would have extremely low interest rates or zero rates like Japan, you would just not have any place to get yield. And I’d say the only place investors will find yield is in cash flow producing income property, cash flow producing real estate. That’s that’s going to be it in a deflationary environment because we rents are even more sticky than sales prices, they move incredibly slow. And why do rents move slowly, that’s an interesting thing to look at Well, with a property is on a one year lease. And tenants usually aren’t as financially savvy as homeowners, potentially. Now, I happen to be a renter as you know, and I highly recommend renting a high end property for yourself and owning lots of lower end properties, you rent to other people, that’s an awesome little arbitrage you get there, okay. But renters generally don’t shop that much. And so they’re on a one year lease and moving is a big hassle and they don’t want to move. So if the owner sticks them with a 4% rent increase every year, they’re probably not gonna move. It’s not worth it. It’s just too much of a hassle. So that’s the reason rents are sticky. So this is just kind of an overview of some stuff we’re going to dive into with more depth over the weekend. Let’s talk about currency. So currency, obviously medium of exchange. Nothing too complicated there. If you Look in your wallet. What’s this called? If you can see it? Thank you smart alec. Yes, class contest winner right over there Federal Reserve Notes. Okay, that’s because it’s only worth faith. That’s all it is. But it’s a $20 bill, right. And it was called a $20. Bill throughout its life 100 years ago was called a $20. Bill, although back then you could trade it for silver or gold. Okay, it was a gold or silver certificate. One of our clients actually gave me two of these things. And I have them hanging in my house. He gave them to me in a nice picture frame and they’re 1928 and a 1923. Like $10 bills. And right on there, it says gold certificate on one and the other says silver certificate, you could actually trade it for something real now. You can trade it for faith. Okay, and so so it’s called the same thing, but the value of it obviously fluctuates dramatically. Right. So sovereign currencies and you know, that just means given by the country, right? They’re controlled by that country. Central Bank and other central banks and that country’s government, but the important thing to know is this. And this is what we’ve got to just always be internalizing no matter what, we’ve always got to think of it this way. I don’t care what you call it. I only care how much stuff I can get for it. Money doesn’t matter. stuff matters. And I always use that example of how many of you saw the movie Castaway with Tom Hanks? Why was Tom Hanks life tough on the island? Because they didn’t have any stuff. If he had more stuff, life would have been more convenient and more luxurious, right? So stuff things matter. But the money doesn’t. So the only question is, how much stuff can you buy with it? How many goods and services Alright, so if we look here, nominal, as we know means a name only. I know this is review for a lot of you. But I just got to set it up because we’re going to talk a lot about this stuff over the weekend is the price in terms of the currency in name. So now here’s the distinction that we’ve never covered before. That’s the price of the property. So let’s take a Orange County example since we’re sitting here in Orange County, and I lived here for many years, and I’m quite familiar with it owned a lot of properties here. So in Orange County, the typical deal is you can rent a $600,000 house, which is not a real nice house here. Does anybody live here by the way? Where do you live in Los Alamitos? Yeah, well, I went to millikin high so Yeah, right there. So in in Orange County, a typical $600,000 house you can get for about 1800 2000 a month. Is that a good deal? depends who you are. Are you the owner or the renter? You know, remember the ideal is 1% Rv ratio. So as an investor, if I deploy $600,000 somehow I want to get 6000 a month. As a renter, I’d love to live in a $600,000 house for only 1800 a month. That’s a killer deal. And if you go up in price it the deal even gets better. Okay, it gets much better if you rent a $5 million home in Crystal Cove, right around the corner from here. I don’t know lately. I haven’t checked But you probably rent that for 7000 a month pretty good deal as a renter, not an owner, right? But the what we think is is legitimate is the real value. And we’re going to call this this weekend, the utility value per month, because this utility value per month, how much income the property either produces for the owner or the renter pays to use it. I remember a long time ago, I was at church in Irvine here at South Coast Community Church, as it was called back then. And there was this really good sermon the pastor Tim Timmons gave, and it was all about materialism and how we shouldn’t be so materialistic, you know, the typical typical drill, right, which, you know, I don’t totally disagree. Okay. One of the things he said was really, really valuable. I mean, it was like a super good thing he said, he said, We don’t really own anything. We are just trustees from birth to death. And I think we can all agree with that. You know, there’s like they say there’s no luggage racks on the Hearst can’t take anything with you, the Egyptians thought so and they built pyramids and tombs and put food in there for King Tut. But, you know, they walk funny anyway. So. So the real value of the property is the monthly utility cost. The price of it is bogus. It’s smoke and mirrors game that’s just fickle and nonsensical. Alright, so we’re really separating that the monthly value versus the overall value or price of a property. And, and that is going to help us distinguish a lot more this weekend. Okay. So, you know, we talk a lot about what do I call it? inflation induced debt destruction, or, and or the double inflation arbitrage, right? So here, what happens to the value of your mortgage debt? Well, the value of your mortgage debt is the currency value, the name of it to be repaid. But the real value is is the difference between you know, this is What what represents your wealth? Okay, what the asset you have here is the spread between the property’s price and the real value of the debt. So I commonly give the example you know, look, if you have $1 million in real estate mortgages, and the inflation rate is 10%, just for round numbers in one year in real value, you only owe $900,000, but the property price may have gone up because remember, we had 10% inflation, it may have gone up to say, say it was 100% financed just for simplicity, it may have gone up by $100,000 to 1.1 million. So, this spread of what you can get for it on the market versus the real value of your debt represents the asset you have. Does that make sense? Yeah, okay. All right. Good. Okay. So, Bitcoin Well, why is this whole Bitcoin thing significant? You know, I almost like feel like we’re going to talk about Bitcoin quite a bit this weekend. Almost Like how to get in the Bitcoin business? I’m not. I don’t own any Bitcoin at all. You’ll hear my story of the first time I ever heard of this thing and tried to understand it. And I was with Michael and his brother and I was speaking at a conference in Belize, one of my least favorite places. Well, you heard the interview with john McAfee, right? Yeah. Don’t go invest in believes. Please stop this stop this stuff with his crazy ideas of these third world countries. Okay, so Bitcoin is a virtual currency. We talked about the Federal Reserve creating fake money. Well, Bitcoin is it’s a cyber currency. I couldn’t even get my mind around this. It took like a month for me to just relate to this concept. Bitcoin is essentially a mathematical equation. Nobody really knows for sure who invented it. They think it’s a Chinese guy. I think the Chinese invented math. Once they Abacus wasn’t that kind of it’s heard of it. So you know, they’re smart, they know this stuff. Okay. And anyway, so it’s this virtual currency. You can buy stuff with Bitcoin people were buying a lot of illicit stuff the feds shut down a website called silk road where you could hire a hitman but yeah oh yeah and pay in Bitcoin you know you could kill someone it’s only like 1000 wasn’t that much? Yeah I mean you know I didn’t use it but I was thinking about it we’re gonna get in trouble for saying that I’m joking well I actually did kind of think about it I have an enemy or two but but anyway um yeah you know knock someone off for $1,000 in Bitcoin but back then Bitcoin was only $42 when I first heard about it, so it was kind of a lot of money, but then Bitcoin became worth over $1,000 just one coin. When people could buy drugs and you know, prostitution and all this stuff, and this website was called Silk Road, they shut it down, and I’m sure there’ll be a million others for everyone. They try and shut down like that, right? But bitcoins the funny here’s what I really had a tough time getting my head around is mining Bitcoins. How do bitcoins come into it? existence Well, if you think about the history of money, and I’d highly recommend that book by Neil Ferguson and I A Ll looks like Niall but he says Neil Ferguson called the ascent of money. And you know, money at first was goods, it was barter of stuff. Stuff matters, right? Okay, Tom Hanks stuff matters. And then it became precious metals, gold and silver coins. Right. And so that was the start of it. And how did those come into existence? Well, they were mined. They had to be mined out of the ground. And with bitcoins, they are mined off of the internet. So does this sound like a scam yet? It may be there’s a ton of videos on YouTube saying Bitcoins are the ultimate Ponzi scheme. It’s a complete scam, and it may well be, I don’t really know. Okay, I just don’t know. But Cody over there. Raise your hand, Cody. Cody is one of my college buddies from a different generation. Okay. And I met Cody because he lived in my partner A building block from ASU and he graduated like almost a year ago. Right? And so Cody sends me an email about a month ago and it’s for a Bitcoin mining machine with Yeah, it’s essentially a server that goes on the internet and processes transactions and that’s how they and when you process Bitcoin transactions you get paid you’re you’re a miner and how much was that like 1700 Wow, so if you want a fast mining machine like the big you know, thing, like you know, that would get the stuff out of the ground I don’t was called but in mining, you know? Yeah. So, so there you go, you know, now just remember during the Gold Rush, at least in California, the people who got the riches were the people selling the picks and the accesses and, and the axes and the Levi’s jeans. Okay to the miners, right? It wasn’t the gold miners, okay, they were just selling the infrastructure and, and so you know, that’s the whole point. Bitcoin mining thing, maybe the best deal is to sell Bitcoin mining machines, I’m not sure. But it’s just like hard to wrap your head around these cyber currencies. And there’s a whole bunch of them. They’re, they’re kind of a big deal. Now, here, here just is what happened just last year. I mean, this is shocking. It’s a bigger return on investment than Coco, the dog. Okay. So in 2013, the price in January started at about 15 bucks,
Jason Hartman 34:26
and ended the year at about 800, but peaked at about 1200 dollars. Now, when I learned about it, I was in Belize. And I remember Michael and I, and I think your brother in law or standing on the beach, and we were listening to this really interesting kind of cagey guy. And this guy had a company that did these, like VPN things that would hide your identity. And so you could surf around the internet anonymously. You know, this was kind of a sketchy crowd I was hanging out with, but I spoke at this conference down there, right and i He explained Bitcoin. I just couldn’t get it. It was $42. Right, Michael? That’s when I learned about it. And then I just watched it go way up, right. But it may collapse just as fast. I mean, look, we’ve seen this chart before tulips. That’s the most famous one, you know, in Holland when they thought, you know, tulips were the big investment people were buying them up, and they had obviously a huge crash. Right? So is Bitcoin a bubble? Yeah, I think so. Probably. When will the bubble burst? I don’t know. You know, there’s the $42. About 1000 new business a week. You heard on the news last week. overstock.com is going to take Bitcoin. Yeah. And the overstock CEO is being like really challenging and antagonistic to Jeff Bezos of amazon.com saying they’re gonna have to take Bitcoin they’re gonna be forced to because we’re taking it right. And so just like a credit card or something, no, you can buy goods anywhere you can go, you can go and look on a Bitcoin exchange, and you can meet a guy at Starbucks. And give them dollars for the Bitcoin but it’s it’s mostly used online, you can today will that last? I don’t know, China outlawed Bitcoin and the price went Oh. So what I say is this, I say that gold, silver, Bitcoin, any cryptocurrency, anything that challenges the most powerful institution in the world, the bankers of central banks, namely the Rothschild family, which is potentially worth nobody knows But you know, you think like Forbes 400 now Oh, there’s Carlos Sims, the Mexican telecom guy, which was who was the richest man right of like $70 billion, I think. And then there’s, of course, Warren Buffett and Bill Gates, you know, 50 billion ish, give or take. It’s just a billion here. They’re no big deal. And you know, you think they’re rich. Well, some have estimated the Rothschild fortune to be worth 230 trillion With a T, not a, b, and certainly not an M, okay, like million trillion. Now, just to give you a reference point, the total economy in one year of the United States of America is about 13 trillion. And the total economy of the entire planet Earth in a year is about 60 trillion. That’s a lot of money. Okay. Yeah. It’s unbelievable. Really? Okay. Well, the market now, but my contention is that central bankers do not like this even though Bernanke he did make a seemingly positive comment about it. I think that was window dressing. I think the powers that be will find a way to crush this. They can just make a login stuff like China did. And they say, you know, they can just make a law and say Bitcoin is like cocaine. You can’t trade it. Can you trade cocaine? No, not without going to prison. So you know, I mean, that’s a good just like corn or gasoline, anything, right? So they could just outline and say it’s illegal. Anything that competes with such a powerful established interest is not something I want to bet on. But ATM machines are going to start working in Bitcoin potentially, that’ll be interesting. And if it really ever arrives and it ever becomes something real, I say, this is how you’ll know when it’s traded on futures exchanges, Cody, you gotta love that forex derivatives markets, then it’s probably here to stay because a huge powerful interest called Wall Street will be behind it. Right. But until then, it could be squashed like a cockroach. So was there? Yeah, question. Your resume on money laundering? Yeah, exactly. If they’re running it, and if the Rothschilds get into the Bitcoin business and the Federal Reserve and all the other central banks. Oh yeah, it’s here to stay But, you know, why would they they have faked dollars that they’ve done a great job of impoverishing most of the world with okay and enriching some. And so I say let’s be on the side, their side, let’s do what they do. Let’s work inside their plan and just, you know, use it and exploit it. Okay. Okay, so last slide here, and I gotta wrap up because we got to have Steve up here, but this is just a comparison of some assets. And like, a year ago, I never even heard of Bitcoin. I wouldn’t have even mentioned it, right. But now we’re talking about it. So it’s kind of interesting. So look at this chart, what’s controlled by the Federal Reserve and other central banks? Well, Fiat dollars the stuff in your wallet that’s controlled by the Federal Reserve Bitcoin is not gold is partially. And the reason I say that is because gold and silver when I say gold, it’s a proxy for all metals, platinum, palladium, silver, whatever, okay. But the the central banks around the world manipulate the price of gold and other metals by buying it and selling it and storing it and suppressing it and taking it off the money. And putting it on, they can intentionally inflict pain on investors because of that income property is not controlled by the Federal Reserve. However, you might say, Well, look, Jason, that’s not really true. And you’d be right to say this, because the Federal Reserve does control the availability of cash to buy it. The financing opportunity for income property is controlled by the Federal Reserve somewhat indirectly. But remember, since it’s a multi dimensional asset class, if they tighten the ability to finance the property that puts upward pressure on rents, we all know this because we understand the multi dimensional nature of income property. Does it rise in value when the dollar declines? Well, you know, the dollar is the dollar so that’s irrelevant. Bitcoin, we don’t know yet for sure. Probably does in relation to the dollar gold. Yes, that’s the historic thing of 5000 years ago for an ounce of gold. You could buy a toga and a pair of sandals. Today, you can buy Man suit and a pair of shoes hasn’t changed much except the clothing got a little better. And it’s made in China. The Toka was probably made in Rome. Okay, they probably didn’t import those. Is it subject to theft? Well, certainly people can steal your dollars they can steal your bitcoins, they can steal your gold, kind of hard to steal your income property. Those are kind of hard to move hard to steal the title. There are scams in real estate, of course, but those are so rare as to be almost negligible isn’t used for illicit activity dollars. Certainly Bitcoin Most definitely. That’s how it got started. And then gold. Absolutely. You know, you’ve seen movies where they give them the gold and then they get though whatever, you know, the missile launchers, income property, no, not really using illicit activity. You know, I mean, meth labs and meth labs, if you can do percentage rent on those I think would be the ultimate business question.
Jason Hartman 41:58
My friend’s house had all the comments But but the asset that just means the asset was deteriorated by a bad tenant, it doesn’t mean that it was used in illicit activity. Right. So So, you know, I think it’s fair to say no, you know, on that one, right, I mean, there are minor things occasionally, but not the ease of use, how easy it is to exchange in dollars super easy, right? Very convenient. But also that creates more volatility because it’s highly liquid. Bitcoin very easy, although, you know, you now overstock.com but you know, most people don’t take Bitcoin yet, like try to pay your hotel bill here and probably won’t work or you know, I have Bitcoin Now, what’s that? They’ll probably say, gold, very difficult to use an exchange. And the one thing people don’t realize about these metals is that, try to sell them. Just try it. I promise you, because I did as an experiment, and you basically have to pay closing costs in and out of the deal, because when you buy the gold or the silver or the Platinum or the Palladium, you pay Premium over the spot price. And when you sell it, you’re either only going to sell it at spot or even below the spot. And to ship it back and forth to the buyer and seller, you got to insure it. And I think that’s a hugely high risk of theft. Because you know, you say you send them 10 coins to get your dollars to cash out, most of these coin dealers are, you know, online. Obviously, they don’t want you walking in having a big vault there, you know, but not only the little ones have actual retail locations, but most of it’s done where their companies you call up and they have a call center and you send it somewhere and who knows if they’re gonna say you really send them 10 coins and I’d say there were only eight in there right? So ease of use No, not easy income property, not easy to use or trade very slow to trade illiquid, which I think is a benefit. Subject to bubbles and crashes dollar certainly Bitcoin most definitely one coming up, I’d say gold Most definitely. And income property Yes, but more sticky, especially in linear markets. So here, you’d really have to separate Write out the linear market from the cyclical market inflationary debt destruction or as I say inflation and do step destruction. Does it have an advantage in that way dollars? Certainly not dollars are destroyed by inflation. Bitcoin? I don’t think so. I think Bitcoin is very similar to dollars in that way. Although relative to dollars, it may look like bitcoins doing well, but ultimately, Bitcoin I think, is subject to inflation, too. They say the amount the supply is limited in open source mathematical equation, okay. That’s just I don’t know, I’m gonna be like Warren Buffett on this stuff, you know, in the first.com bubble around, I don’t know, 2000 or 1999. When all these stocks were going nuts, it’s a you know, remember the words 13 years ago, 14 years, it’s a new economy. What happened? Right, Warren Buffett said, I’m not doing technology. I don’t understand this stuff. You know, I just went home, Geico and Coca Cola and things like that, you know, so maybe it’s good to be a little less sophisticated. Sometimes like that. So gold No, it just is a it ideally just keeps pace with inflation, it’s insurance against inflation, but it doesn’t have an advantage from inflation. It’s a it’s a peacekeeper, not a exceeder income property though because of the multi dimensional aspect and the debt against it hugely advantageous with inflation. And then the last one we threw in for Steve disliked by Paul Krugman. Steve you listening back there? Where are you? Oh, I thought you were over there. Okay. Yeah, disliked by quote Paul Krugman. So whatever Paul Krugman says, just do the opposite. That’s pretty good idea because he’s an idiot. So Fiat dollars. He likes them. So I would want my money there. Okay, Bitcoin. He doesn’t like that, because it’s not part of that central banking scheme. And the government gold he doesn’t like and he doesn’t like income property. So just do the opposite of what he says and you’ll be in pretty good shape. Alright, that’s it for me for now. You’ll see a lot of me this weekend though. But Steve, come on up. And let’s talk about what investment counselors are here to do. And then we’ll take a little break.
Announcer 46:12
I’ve never really thought of Jason as subversive, but I just found out that’s what Wall Street considers him to be. Really now, how is that possible at all? Simple. Wall Street believes that real estate investors are dangerous to their schemes? Because the dirty truth about income property is that it actually works in real life. I know. I mean, how many people do you know not including insiders who created wealth with stocks, bonds, and mutual funds? those options are for people who only want to pretend they’re getting ahead. Stocks and other non direct traded assets are a losing game for most people. The typical scenario is you make a little you lose a little and spin your wheels for decades. That’s because the corporate crooks running the stock and bond investing game will always See to it that they win. This means unless you’re one of them you will not win. And unluckily for Wallstreet Jason has a unique ability to make the everyday person understand investing the way it should be. He shows them a world where anything less than a 26% annual return is disappointing. Yep. And that’s why Jason offers a one book set on creating wealth that comes with 20 digital download audios. He shows us how we can be excited about these scary times and exploit the incredible opportunities this present economy has afforded us. We can pick local markets, untouched by the economic downturn, exploit packaged commodities investing and achieve exceptional returns safely and securely. I like how he teaches you how to protect the equity in your home before it disappears and how to outsource your debt obligations to the government. And this set of advanced strategies for wealth creation is being offered for only 197 dollars to get you’re creating wealth encyclopedia book one complete with over 20 hours of audio. Go to Jason hartman.com forward slash store. If you want to be able to sit back and collect checks every month, just like a banker Jason’s creating wealth encyclopedia series is for you.
Announcer 48:29
This show is produced by the Hartman media company All rights reserved for distribution or publication rights and media interviews, please visit www dot Hartman media.com or email media at Hartman media.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax legal real estate or business professional for individualized advice. opinions of guests are their own The host is acting on behalf of Platinum properties investor network, Inc. exclusively.
Jason Hartman 49:07
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