ANNOUNCER 1: Welcome to Creating Wealth with Jason Hartman! During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing. Fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine self-made multimillionaire who not only talks the talk but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it and now, here’s your host, Jason Hartman, with the complete solution for real estate investors.
JASON HARTMAN: Welcome to the Creating Wealth Show. This is your host, Jason Hartman. This is episode number 325, 325 and we are going to talk to our guest today in a little bit here. That will be Dennis Miller with Casey Research. You know, we had Doug Casey on the show before and he’s got some interesting stuff to talk about today in terms of Retirement Reboot. So, whether you’re planning to retire soon or not, this will definitely apply to you either way because the discussion just generally went into a bunch of discussions about very important economic issues and so, we’ll get to that in a moment but first, Steve is here with me to help with the intro portion of the show and we’ve got a few things to talk about as well, Steve. We’re gonna talk about condos, manufacturing, bunch of different things. Where would you like to start?
STEVE: Well, we’ve got a full plate today. You and I, we need maybe a couple of pieces on the plate to make a full show out of it—
JASON HARTMAN: [LAUGHING]
STEVE: So we gotta, we’ve got to hurry today [LAUGHING].
JASON HARTMAN: Yeah, we’ve got a lot of stuff to cover and you know, we always try to say, we’ll, we’ll keep the intro portion to like 15 to 20 minutes and we never seem to pull that off. I’m sure we won’t do that today because we’ve, we’ve got quite a few things on the agenda, but what shall we start with?
STEVE: Well, I would like to start with interest rates because they are up. To everybody’s shock, the chairman as I so kindly refer them [INDISCERNIBLE]—
JASON HARTMAN: Chairman Ben.
STEVE: Yes. The, the chairman is not so lenient with his premonitory crack anymore, is he?
JASON HARTMAN: No, he’s uh, he’s reining it in a little bit and I guess he’s had some, some pressures to do that, but I, I’ll tell you, the, the interest rates—my one wrong prediction in the last, oh, you know, I don’t know, my one major wrong prediction I’m sure I made a couple of minor wrong predictions, but a major one is interest rates. Frankly, I thought they’d be lot higher by 2010 than they were but, you know, this crisis was so much bigger than anybody expected, but with the part that I didn’t predict about that is the Wall Street shenanigans. I knew there would be a crisis created by the mortgage situation. I knew the lending was too liberal. I knew there would be foreclosures. I knew there were a lot of stupid loans out there when I was talking about that way back in 2004. So, you know, I knew that would happen, but never did I know that Wall Street was creating all these crazy products and selling them to other—I don’t want even say selling them—offloading them on to other countries and other unsuspecting funds and buyers and selling the same loan 30 times and the 30 different pulls that was just insanity but what’s interesting—in the, in the mortgage meltdown and the, and the financial crisis that, I guess, someone argued were coming out of. I don’t know if I agreed with that, but there were lot of homeowners that went in and contested their mortgage because the lender could not find the note. They couldn’t find the loan documents that the borrower’s signed, saying they owe the money and, of course, the lender has to have to have that for it to be in forced bond. Some people actually completely skated on their mortgages where the court ruled and said, “Look, you may say this person owes you the money and you’re trying to foreclose but if you can’t produce the note, then you’ve got nothing.” So, the person like basically would win the lottery [LAUGHING], you know. Oh, that $200,000 mortgage you thought you have, no—I guess you really own the property free and clear. It was a pretty good deal because the reality was they did owe the money, probably.
STEVE: I’m guessing that this happened mostly in courts and the bay area, Santa Monica, and the north East. I don’t imagine that happened a lot in Dallas, Texas, or Louisiana.
JASON HARTMAN: I don’t know about that. There are some—
JASON HARTMAN: Liberal judges in every town, but I’m not sure about that, but you maybe right, but I’ll bet you another place it happened a lot is Florida.
STEVE: Yeah, well, that place, who knows what’s going on.
JASON HARTMAN: Florida is, Florida was such a mess. I mean just—
STEVE: Yeah. I, I think that there just wasn’t any case law. There wasn’t much precedent on this issue and I think that’s starting to come out. I mean, lenders are making the argument now that we don’t have the note, but we have this copy of it. They’ve been making payments for two years and they stopped. We’ve been in contact. Clearly, there was an agreement. I, I think more often and not the judges will decide what the bank, but you’re right. Sometimes, people do win that lottery and the judge waves his magic wand and bye-bye mortgage, right? [LAUGHING]
JASON HARTMAN: Yeah, yeah. It’s, it’s pretty amazing, but I, but I gotta tell something else. There is actually a reason I bring this up because it’s just happened to me [LAUGHING].
STEVE: Get out.
JASON HARTMAN: You’re not going to believe this. One of the apartment buildings I own with a couple of partners, I signed—about a year and a half ago, I had to go in and signed before, right before the New Year. It was I believe December 28, 2011. We refinanced the property and pulled cash out of it and it was a great deal. I got 10-year fixed interest rate on a large apartment complex that I’m a partner in and got some cash out, too. We have more than four units, okay, and I had to go in and I had to sign the, the long documents and so, you know, so that the other partner and it, it’s a 3.4 million-dollar loan amount and it was, I believe, 4.6% for 10 years which is a damn good deal on a commercial loan.
STEVE: That is, yeah, wow!
JASON HARTMAN: Commercial, it’s fixed for 10 years. Usually, you can’t get fixed for more than like five to seven on a typical commercial deal.
STEVE: That’s right.
JASON HARTMAN: The residential deals are much more desirable, but this is large 125 unit-apartment complex. So, 3.4 million-dollar loan amount, well, guess what? Just last week, I learned that they wanted me to resign the note.
JASON HARTMAN: And I said, “Why?”
STEVE: Why? [LAUGHING]
JASON HARTMAN: And they said, “Well, we lost it.” [LAUGHING] We can’t find it.
JASON HARTMAN: You know, can you believe in this era of computers and digital archival systems that they would lose something that important, a 3.4 million-dollar note? Just lost and we lost it, and we misplaced the thing. Now, listen. I misplace things all the time. I hardly ever lose anything but sometimes, finding it is an issue. I’m, I’m a bit of a pack rat.
STEVE: Oh, what bank is it? This gotta be Bank of America.
JASON HARTMAN: Uh, no, no, no, no, no.
JASON HARTMAN: It’s not a bank you’d recognize. It’s like an insurance company or something like that. I, I can’t remember. I’ve got the note on my desk here. I, I didn’t look at the new one. I, you know –
STEVE: Can you imagine being in that meeting where there, they realized that they’re going, “So do we call this guy or do we just let the dogs sleep and not tell it [LAUGHING] that we lost the note?”
JASON HARTMAN: Yeah, yeah. Yeah, it’s, it’s mind boggling. I mean, you know, we lost the note but, but now, they have provisions in a loan documents that say if we lose any paperwork or paperwork is incomplete, you agree to cooperate and, uh, help us remedy our mistake [LAUGHING].
JASON HARTMAN: So, they’ve, they’ve gotten a little smarter and they’ve protected themselves, but I, I just—
STEVE: I’m gonna put that in my, in my mortgage docs from my investment properties. If I stop making money or don’t want to pay you, you agree to cooperate.
JASON HARTMAN: Yeah, exactly.
JASON HARTMAN: There you go. But you know, I tell you, this is one of a kind of total wild card, odd ball, win the lottery, rare benefit, is that you might somehow get relieved of a mortgage obligation. I mean, it’s happened. I remember back in the, the early 90s when I was selling real state in Irvine, Newport Beach, and, you know, Southern California Orange County area and you know, I was just a traditional realtor back then. It was before I owned a company and I remember there were these, these CHFA loan, so like California Housing Authority. It’s some sort of acronym. Anyway, you know, it was to help people get into this one condo development that I, uh, I owned in myself and, uh, I had two units there, and I sold a lot of units. I was a, uh, a farming agent, so I would take a lot of listings and, and sold the homes in there. My signs were everywhere Jason Hartman, you know. Everybody knew who I was in this area and a couple others like that and I remember some of these people—I don’t know why and I don’t did really understand back then—but I remember, they would just get relieved of their mortgages like some of these mortgages were just, poof! Voila! It’s gone. Abracadabra, your mortgage is gone for some reason and I, I don’t know why that happened, but I remember how unbelievable it was. I thought this person had 125,000-dollar note against their 150,000-dollar condo in Irvine and it was just gone.
STEVE: Just gone?
JASON HARTMAN: They won the lottery. Amazing!
STEVE: Just off to, to the Fed—off to the Fed’s balance sheet most likely is where it ended up.
JASON HARTMAN: Who the heck knows? But there is another reason to as Rick Edelman, a former show guest and very well-known author in financial planner, who’s been on the show. I think he was on like somewhere around number 180 or 190 shows, something—somewhere in that range. You know he has this great video and, and if you haven’t seen it, I’m, I’m sure it’s on YouTube. In fact, I should look it up as you’re talking, I’ll be typing, Steve. I’m not paying attention to you because I will be looking this up and it is called 10 Great Reasons to Carry a Big, Long Mortgage and never pay it off.
STEVE: Well, this is how I can get a word in on the show. I just need to send Jason looking on YouTube because otherwise, I won’t be able to talk, but we, we initially—we’re started talking about this with interest rates because, you know, most of the Pro Formas on our website for investment properties lately have had interest rates of anywhere from 4.25% up to 5% and it’s a different story today. Just within the last two or three weeks with Chairman Ben, he’s not—he hasn’t even tapered the easing of the mortgage-backed securities that the Fed is buying. He just said that he might later in a year and that, alone, has caused rates to jump and so now, the, the average investment property mortgage is 5% or maybe a little bit higher. So, we wanted to get that out to everybody that’s listening without something you should expect. We’re trying to get all the Pro Formas adjusted for that. I, I just need to point out though that historically, foreign investment property, that’s crazy low and—
JASON HARTMAN: Oh, of course, it is, yeah.
STEVE: Yeah, and that’s, that’s why you have the, the commandment out of the 10 that the deal must make sense today. A lot of people have been waiting for the perfect one or they’ve been waiting for the next one. Will rates go down and, and you see what waiting does. I mean, that’s why they say don’t wait to buy a real state, buy real estate and wait. I would couple that with your commandment that the deal must make sense today. If it makes sense, go.
JASON HARTMAN: I’ll tell you something. You’re making me depressed here.
JASON HARTMAN: [LAUGHING] Because, you know, I just, as you were saying that and I’ve experienced so many investors doing that for so many years, you know. All was looking for the perfect deal and waiting and so many deals passed them by and, you know what, God! If I do the same thing in my dating live and this—
JASON HARTMAN: Is why I am single, okay? Waiting to find the perfect girl to marry, right? And I tell you folks, do not follow my bad example. You run the risk of ending up lonely [LAUGHING] or, or, you know, in this case, with the investment properties ending up broke [LAUGHING] as inflation destroys your wealth. I’m pretty good of being decisive in business. I, I—you know, I’m a Libra. Libras are known for being a little indecisive and I guess, I have, I’ve handled that in business. I gotta handle it in love life though, huh?
STEVE: Yeah, I mean, maybe so. A lot of our investors are—you know, here’s a metaphor for you. Like Jason, he is on the deck of his penthouse in Phoenix, looking down today as you and, and all of the options and he is just waiting for the perfect one to come.
JASON HARTMAN: [LAUGHING]
STEVE: And now, interest rates have gone up, so—
JASON HARTMAN: Well—
STEVE: Yeah [LAUGHING].
JASON HARTMAN: The, the perfect ones here are too darn young for me, so [LAUGHING].
STEVE: They are. That’s new to me. Well, that’s—what I would try to get out here is if a deal make sense today, I don’t know that you should wait because it might make more sense tomorrow. You don’t know. That’s why they say don’t wait to buy real estate, but real estate and wait. If it makes sense today, great, you can’t just sit there timing it. That’s how people go broke the stock market. They’re trying to time the market.
JASON HARTMAN: Oh, you know, market timers never win.
STEVE: Yeah, exactly.
JASON HARTMAN: They just don’t. I mean, look, folks. Think about it. Here are options. Yes, maybe a better deal on, on a property will come along tomorrow, maybe interest rates will drop tomorrow, I, I wouldn’t count on that one, but who knows, okay? At least, if you own a property and rates drop, you may have the opportunity to refinance—
STEVE: That’s right.
JASON HARTMAN: At a lower rate, but if you don’t own the property, you’ve got nothing. The thing you’re wrestling against is, is the opportunity cost or what else are you doing with your money or your money is in the bank and certainly, you’re getting just destroyed there. Your money is in stocks, you’re probably getting destroyed there, I don’t know. You could be one of the 1 in 100 of a percent in the stock market who actually makes money and, and does well, but most people don’t. So, that’s your decision. It’s not the decision between, is this still good enough or, or will there be a better deal tomorrow. The decision is between this is what my deal is now. I have my money in the bank, earning maybe a quarter of a percent and after inflation and taxes, I’m probably losing 8% to 10% annually if you believe the official numbers which, of course, are understated. You’re losing, with inflation and taxes, probably 3% or 4% annually, depending on which number you look out there but, but I say, you’re losing about 10% annually. So, do you wanna lose 10% annually or get a property that has a performance return of maybe 25% annually that only does half as well as that and gets you only 12.5% annually, only half as well as expected or projected and look at the difference there. Just ask yourself, how many times better than the bank is that? So, if you’re doing a quarter of a percent in nominal return at the bank, well, 12 x 4, let me see, okay. So, here’s the simple math. You are 48 times better off in a property, getting you 12%, only 12% in multi dimensional return than you are with your money in the bank and we’re not even counting the destructive power, if your money is in the bank or the stock market versus the beneficial power of inflation if it’s in a properly-financed property. It’s even better than that. I mean, it’s just so frustrating how investors just shoot themselves in the foot constantly and we kinda gotta stop talking about this. I, I know we’ve been talking about this in the past couple of shows and we’ll stop harping on it because I know a lot of you listening are decision makers and you’re doing stuff and you’re making a lot of these decisions and listen, my hats off to you, applause to you. My only question would be are you doing enough because certainly, we believe this is the, the time, okay? [LAUGHING]
STEVE: Yeah, we’re, were in this everyday. We see how historically great the returns are and so we can’t help it [LAUGHING]. We cannot beat the horse to death here I guess, didn’t we? [LAUGHING]
JASON HARTMAN: Yeah. We’ll, we’ll tone this down, okay, folks? Let’s, let’s talk about condos and let’s talk about manufacturing, Steve, manufacturing as it relates to the broader economy. Which one do you want to go for first?
STEVE: Well, the manufacturing comes off of a question from a listener that, uh, got sent into us. So, I tell you what, I don’t—I just read it and, uh, we can get into manufacturing from there.
JASON HARTMAN: Sounds good to me.
STEVE: From a listener, Chad. Thanks for sending in the question, Chad. Basically, he says, with about 1/10 of US workers in manufacturing, do you see things as out of balance? Can a service-based economy be sustained in the long run and is it a nostalgia with manufacturing holding us back or are our technologies like 3D printing needed to help us gain back an advantage in manufacturing and have a more balanced economy like in the past? Just curious on your view, keep up the good work.
JASON HARTMAN: Well, that, that’s a good question, Chad. So, thanks for sending it in. First of all, I think we need to define service economy and understand what companies are in the service business, what type of businesses are service economies. So, I would define as, as service economies and Steve, maybe you can help me out at this list, but this is just off the cuff. Certainly, a place you go to get your haircut is a service business. A law firm is a service business. A realtor is a service business. These are service businesses, okay? A chiropractor is a service business, that, that kind of thing.
STEVE: You pay, they do something for you.
JASON HARTMAN: Yeah, exactly. You know, those are like retail service businesses. Now, what is not manufacturing, although they did just move some of it back to the US, I believe, for the iPad product and that is Apple. Apple is pretty much, until just recently, not a manufacturer in the United States. They manufacture in China as pretty much everybody knows but, but then look at a company like Facebook. Facebook employees, a lot of people, certainly they’ve had a pretty big impact on the economy and all of the other sort of software-based technology companies like that. I mean, those aren’t manufacturing companies, but I also wouldn’t really classify them as service companies. I guess you could call Apple—you know, let’s just say before they brought some of the manufacturing just recently back to the US, okay? Say they did it all overseas. All of Apple’s manufacturing is in China for purposes of this discussion. I guess, you could call Apple a design firm, right? You know, when you open their products, it says, designed by Apple in Cupertino, California, right? So, we, you gotta wrestle with that a little bit. What really is a service versus manufacturing? I, I think there is really more to the economy than just service versus manufacturing. I mean, what do you call all of the oil drilling in North Dakota or the Gulf? Well, I guess that’s manufacturing, right? I mean, that’s heavy industry for sure, but then all the firms that are—the geology firms and the, and the, you know, all the ancillary businesses around those firms that help in the exploration and so forth. America is turning into a, a pretty awesome energy producer. I mean, what an exciting thing for America if the government, namely, the Comrade Obama, will get out of the way and let us exploit our natural resources here. But Steve, what are your thoughts on that before we move on to answer the rest of the question?
STEVE: Well, I—it, it’s all very interesting in Comrade Obama is not gonna get out of the way on a side note but, you know, when we talked about—
JASON HARTMAN: Hey, hey, I want to say something about that before your comment.
STEVE: Okay [LAUGHING].
JASON HARTMAN: And this—I’ve said it before folks. Environmentalism is a luxury of a rich society and, and hear that again. It’s a Jason Hartman quote. Quote me on this one, “Environmentalism is a luxury of a rich society” and when, when things get tough, all of, all of our tree-hugger friends at their yoga classes and sitting at Starbucks, they’re gonna want their stuff and—
JASON HARTMAN: They, they’re gonna want an economy and listen, I go to yoga and Starbucks too, okay? I’m just making fun of myself a little bit, too [LAUGHING].
JASON HARTMAN: And I would end saying that and I like trees, by the way. That’s one thing I really don’t like about living in Phoenix because I miss trees, okay?
STEVE: You’re one of the few libertarian hacks at Starbucks?
JASON HARTMAN: Yeah, and I, I’m a strange guy. It’s hard to fit me—
JASON HARTMAN: Into a mold although people try, but if things get tough and some would argue things are pretty tough now or, or still tough and that the recovery is not for real and I would I agree with that in a lot of ways. We’re gonna go and we’re gonna, we’re gonna exploit our natural resources, okay? That, that’s, uh, a power struggle that will be dictated by economic hardship and realities.
STEVE: Agreed. I, I lived in a third world country for two years and, and there, they don’t have the luxury of environmentalism. They’re too busy trying to stay alive.
JASON HARTMAN: Yeah, yeah, and you’re referring to the Dominican Republic, I assume?
STEVE: That’s correct, yeah.
JASON HARTMAN: So go ahead, what was your comment about service versus manufacturing now?
STEVE: Well, you know, I think service is blurry too, especially here in the United State. While we’ve been talking, down in the street a little bit, a couple of properties away, a landscaping crew pulled up to perform some service to this property and as I look at them, I can tell they’re not from around here [LAUGHING] which is not a shock to you, I’m sure.
JASON HARTMAN: Right, yeah.
STEVE: So, so much of the service economy is not reported. Uh, so much of it is not tracked, too.
JASON HARTMAN: Yeah, good point, um-hum.
STEVE: You know, so, I don’t think that that the US has ever been predominantly a service economy and, and to a degree, 15 million or so people that are in the service economy, a lot of it isn’t reported. I mean, they buy goods and services, but I think the US is more of an innovative economy. We’ve always been on the cutting edge of technology. Many of the inventions that are in the technology that’s used in the world, they showed up first here in the United States of America. So, you know, I think that gets us in the second part of that listener’s question about technologies like 3D printing, uh, helping us, uh, getting advantage in this once again. We can innovate it here, but I don’t think that we can produce it here for the cost that it needs to be produced at.
JASON HARTMAN: Yeah. One of the interviews that you and the listeners are gonna love that I just recorded yesterday is with James Altucher, that’s A-L-T-U-C-H-E-R, James Altucher, and he was a hedge, hedge fund manager dot com guy, got very rich, got very poor, got very rich again and very poor again, and then rich again, and [LAUGHING] so—
JASON HARTMAN: He’s, he’s got a great story and we really talked a lot about the economy and financial instruments in Wall Street and so forth and you’re really gonna like that interview. It’s, it’s coming up fairly soon here. We’ll, we’ll get that one published but, yeah, when you look at 3D printing, Motley Fool, there are a couple of guys that publish news letters and they’ve had radio shows and so forth, the Motley Fool radio show I used to listen to, uh, and, and they’re in the stocks and the stock market, and they, they published an interesting video recently about 3D printing, and as you, regular listeners now, I’m a big fan of 3D printing. I think it’s a huge shift in technology. It’s gonna change the game in a lot of ways; however, it’s not for mass manufacturing. Okay, I, I doubt that 3D printers will be used in mass manufacturing, but they will be used in small run and costume manufacturing that will provide a lot more options for a lot of things and you know, 3D printers right now start about $1200 or $1300 and, and you know, when that price comes down to about 700 bucks, I’m gonna buy one because I just start to think about the things I can do around my house, myself with the 3D printer just as little utility things. I, I don’t know if you know this, Steve, but when I was growing up, I was so much into being like an inventor. I loved Thomas Edison biographies and I, I would really follow him and you know I used to do all kinds of experiments that probably made by mom really concerned. I used to a make hydrogen in the kitchen sink [LAUGHING].
JASON HARTMAN: You know, you can do that. It’s pretty easy to do. You can make your own hydrogen and then what I will—
STEVE: Very dorky but very possible.
JASON HARTMAN: Yeah, I’m a pretty dorky guy. This is maybe the reason I’m actually not married [LAUGHING].
STEVE: Uh, now that we think about it.
JASON HARTMAN: Yeah.
STEVE: Yeah, it’s all odd enough [LAUGHING].
JASON HARTMAN: Yeah [LAUGHING], but make hydrogen in the sink and then let it, let it in to a paper bag and then we used to light the paper bag on fire [LAUGHING] and let it float up.
JASON HARTMAN: You would never do that nowadays. It’s way too dangerous by today’s standards.
JASON HARTMAN: But things were a little bit wild and crazy back then, and you know, I remember I used to make, uh, light bulbs and I made a carbon arc light that I would run in my bedroom and that’s like the light comes out of the arc between the two pieces of carbon there and so, I would do all kinds of crazy things like that and a 3D printer, I mean, you can do all sorts of cool things like do you, do you wanna make a new door handle or do you wanna make a model of something like a prototype. I think it’s going to do advance technology a lot more quickly just with the way designers can make prototype of things and, you know, if you have an idea, just say it, stick on the 3D printer and do a little cad work, and it’s gonna bring this to the masses. So, that will be an economic stimulant, no questioning about it, and then the reason I brought up my interview yesterday with James Altucher is we talked about ways that people can make money and we talked about the, the way the internet and this distribution is, this, what they called a distributed electronic network—that’s another name for the internet—really creates a lot of value and allows a lot of people to play in the game who could never play in the economic game before, and I’ll give one example. Maybe some of our listeners have heard of it. There’s a website called, fiverr.com. What an incredible innovation. Britney, who works for us, told me about it, uh, a couple of years ago. You can, you can basically buy all kinds of crazy things on Fiverr for 5 bucks and why is this important? Well, these are services, but they allow a lot more people who probably are under the rate or making pretty good money and maybe not reporting to make a living for themselves where people do things on Fiverr like some good looking girl, for example. We’ll say I’ll hold the sign with your logo or your website for 5 bucks and send you the picture, okay? Now, you might think, “Oh, that’s so stupid,” right? [LAUGHING] No, folks. The fact is for websites and blog posts, a lot of people buy stuff like that. You know, you can have someone on Fiverr for 5 bucks send you a postcard from Paris with the picture of the Eiffel Tower. You know, I don’t know why someone would want that really, but maybe it did fun way to make new friends. I—you know, who knows? But, but all, all sorts of stuff, people will help you with search engine marketing, design a book cover for you, 5 bucks. That’s it, $5. Really, that’s all it cost and what this is doing is it’s allowing prices to fall dramatically so that more people can create more stuff, more products, more information, more books. I, I only gave a couple of examples of Fiverr, but there are so many, you know, if you want someone to, “Oh, I did this one once.” I got my mother, a mother’s day video on Fiverr, it cost me 5 bucks. She probably think, thought, it cost me a lot more to have this done and my mom and I are both dog lovers and so, I, I hired this guy on Fiverr that has his dog talk to mom on the video and wish her a happy mother’s day and you know—
JASON HARTMAN: I mean, for fun, it works, right?
STEVE: Hey, more ridiculous ideas have been successful.
JASON HARTMAN: There are thousands of people making real livings off of Fiverr and there are many other websites like this, okay? So, I’m telling you that there is a huge shift going on and there are a lot of reasons to be very optimistic. Uh, the Fiverr category gives graphic design, video and animation, online marketing, writing and translation, advertising, business, programming and technology, fun and bizarre, music and audio, people will do voiceovers, make you a piece of handmade jewelry and send it to you, make you a, uh, personalized greeting card, call your friend on their birthday and sing happy birthday to them. Crazy idea, I mean, capitalism is so incredible, Steve. It really is incredible. What people will think of, it blows my mind every day.
STEVE: Yeah, yeah, and, and you know, 3D printing, to go back to that, is gonna make a lot of things interesting. I was just looking here in my cover on my smart phone, it’s getting a little flimsy and broken. It’s only a matter of time before, you know, “Hey, I need a new cover.” You just print it out.
JASON HARTMAN: Yup, yeah.
STEVE: You know.
JASON HARTMAN: That’s a good point.
STEVE: People are doing it with parts for firearms [LAUGHING] and other—
JASON HARTMAN: Oh, yeah, yeah. You can print—
STEVE: Printing guns.
JASON HARTMAN: There are, there are gun blueprints where you can make it, I believe, an AR-15 which is the gun the Obama administration has been attacking so much, the so called, assault rifle, which, by the way, doesn’t fire any faster than any other semi-automatic gun because it’s not a machine gun. It just looks like a machine gun.
STEVE: It looks—I saw an AR-15 walking down the street the other day, just indiscriminately shooting people.
JASON HARTMAN: Yeah, you’re [LAUGHING]—that’s a lie.
JASON HARTMAN: I get what you’re saying. Yeah, the gun, guns don’t kill people. People kill people, yeah, so—
STEVE: That’s correct.
JASON HARTMAN: Okay. If you want more on this, listen to my Holistic Survival Show. We’re about to discuss this concept quite a bit, actually, but blueprints for guns, uh, gun that you can make on a 3D printer. Someone actually made a car on a 3D printer. Someone posted on their Facebook page about two weeks ago. I thought it was pretty funny. Can a 3D printer print another 3D printer? [LAUGHING]
JASON HARTMAN: And, and the answer to that, by the way, is yes, it can.
STEVE: Yeah, of course, it can.
JASON HARTMAN: Okay? Ultimately so, so they can, uh, recreate themselves, okay? [LAUGHING]
STEVE: We had part, uh, pump go out on our washer yesterday. It’s a plastic part. I’m sure and I had to call Sears and give them the part number. I’m sure that you’ll be able to download—
JASON HARTMAN: Whoa-oh-oh-oh-oh! Sears? You, someone actually still shops at Sears?
STEVE: Well, they had the part. They could give to me fast, but I was surprised to find that they still exist, too. My, that was my most recent interaction with Sears other than 15 years ago [LAUGHING], but you, you’d probably be able to print out replacement parts for appliances, computers—it’ll be crazy.
JASON HARTMAN: It, it really is amazing. There are a lot of reasons to be optimistic, but—you—several years ago, a guy named, Stan Davis, wrote a book that’s pretty interesting. It’s called “Mass Customization”, and it’s about how Levis—well, I mean, one of the stories and it was how, how Levis, obviously Levis jeans, is struggling. That company has been around forever. I think they’re still in business, but I know that they’ve had some problems and I maybe filed a bankruptcy. I haven’t kept up with them, but they were offering to make custom blue jeans for people and, you know, you can do this really easily nowadays. So, the consumer can get jeans just the way they want them; exactly, you know, in the color, in the style, in the fit, everything. I remember my ex-girlfriend, Lynn, she went in and wanted to get a new bathing suit and they had her put on this, this blue-colored one-piece bathing suit and went in to this like booth where it took pictures of her and suggested, just for her body type, what the most flattering swim suit was. This is an example of mass customization and then she can just have it made and the price is not high anymore. So, these things are all tremendous. They, they have tremendous economic value to them and a lot of good stuff coming out of this.
STEVE: Yeah, yeah, definitely.
JASON HARTMAN: This, this intermediation that allows people through the internet to get right to the source. You know, I realized this back in 1999 when I published my first book “Become the Brand of Choice,” okay, which is about relationship marketing and I, I remember, it took me about seven minutes, my first experience ever in doing this to go on Amazon.com and list my book for sale and I thought, wow! Before, you used to have to get a publisher and you had to be picked by somebody and now, you can just pick yourself and you can say, “Hey, I’m gonna a publish a book and I don’t care what anybody thinks of it. I’m gonna expose it to the world and I’m gonna find my own audience or let them find me,” and in seven minutes, I can have my book exposed to the entire planet earth on Amazon.com and I can get money for that, and, I mean, what a, what a shift that is going on, what a, what a brilliant, wonderful shift where there are so many opportunities, and a lot of this—
STEVE: Pretty amazing, yeah.
JASON HARTMAN: Yeah, a lot of this, it changes the economic game and a lot of it changes the way we do, real estate as we talked about before, how geography is less meaningful than it’s ever been in human history, and that, that’s true for your tenants, but it’s also true for US real state investors because from your desk or from your iPad lying in bed, okay, you can research your properties, you can look at satellite images, you can go to Zillow and Trulia take everything with a grain or salt there because it’s not that accurate, but [LAUGHING], you know, it’s better than nothing, it is a guide. You can get all sorts of information. You, you just never had access to before. I mean, incredible, incredible world in which we live.
STEVE: Yep, yep. So, to sum it up in one corner, we have the vast natural resources of the US and innovation and the other, we have socialism and the Fed and we will see who wins out, right?
JASON HARTMAN: Well, it’s gonna be—it’s—this is an epic struggle that’s been going on since the beginning of time, okay, the haves and have nots. This is nothing new and we’re just going through it today, and it’s just more consolidated, powerful, and has more media and so forth, but this has been going on forever, okay?
STEVE: Yeah, and I think we’re—
JASON HARTMAN: And the pendulum will keep swinging back and forth.
STEVE: Yep, yep, and so, of course, you know, with the market changing, people because of those things we mentioned, they wanna own hard assets, they wanna own real estate. We’re getting asked more and more about condos which you have, well, according to you, covered ad nauseam on the show.
JASON HARTMAN: I have.
STEVE: You let me continue to get asked about it.
JASON HARTMAN: Yes, yes, yes, and, you know what, we don’t have time to really cover this. We gotta get to Dennis Miller and I hope you like George Gilder on the last show. We’ll have Jerome Corsi coming up and we’ve got James Altucher did a great interview yesterday. I can’t wait to air that one as well, but surprising to say, Steve, let’s talk about condos and detail on another show, but I’m not crazy about condos, folks, and be careful. You’ve heard me say it probably. Condos are just not the ideal. I’ll make an exception here and there, but it’s certainly not the ideal. I love the good old tried-and-true single-family home. Duplexes, triplexes, and four flexes can be okay, too. The only problem you get into sometimes with those is that some of them, I see a lot of the marketed-buyer competitors, the few competitors that we do have that are in pretty bad areas. Some of them can become pretty, pretty bad areas. Okay, so that’s what you gotta be careful of there but the same is true of condos and homes, too, just do your right diligence and we, of course, help with that, but we’ll talk about that more. We gotta get to our guest because we went on so long again. Just—
STEVE: Yeah. Like we said we would, don’t say we didn’t stick to our word everyone.
JASON HARTMAN: [LAUGHING] That’s true, folks. Anyway, Steve, anything else real quickly before we get—
STEVE: No, I’ve said enough.
JASON HARTMAN: Alright.
STEVE: They’re tired of me.
JASON HARTMAN: Alright. Hey, we’ll get to our guest now. We’ll be back with him in just a moment here, okay, and we will be back with Dennis Miller in just about 60 seconds.
ANNOUNCER 2: Now, you can get Jason’s Creating Wealth in Today’s Economy, home study course. All the knowledge and the education revealed in a nine-hour day of the Creating Wealth Boot Camp, and a home study course for you to dive into at your convenience. For more details, go to jasonhartman.com.
JASON HARTMAN: It’s my pleasure to welcome Dennis Miller to the show. No, he’s not Dennis Miller, the comedian or political consultant, but it’s Dennis Miller who is a new Casey Research author. Of course, we’ve had Doug Casey and some of his people on the show before and he’s the author of Retirement Reboot and today, let’s talk a little bit about this stuff. Dennis lives in two places, both in Florida and in Illinois, but he happens to be right near me in Scottsdale, Arizona today. Dennis, welcome! How are you?
DENNIS MILLER: I’m just fine and thank you for inviting me on the show.
JASON HARTMAN: Well, it’s my pleasure. In your book, Retirement Reboot, it’s your personal story of how you realized your retirement was being threatened by the low interest rate environment and, and, you know, let me just make a comment on that. Most people love low interest rates except retirees or people living off savings because there is just, you can get a yield outta, out of the, the savings that you’ve created throughout your life but, of course, if you want to buy properties or finance things, or use finance to go on your business, it’s a good thing, but it’s really a double-edged sword for large part of the population, but how did you work a retirement based on what’s going on nowadays?
DENNIS MILLER: Well, I’m, I was the typical Benjamin Graham passive investor.
JASON HARTMAN: Fundamental analysis, yeah.
DENNIS MILLER: I get my first—yeah, I get my first social security check 10 years ago and for the first several years of my retirement, the old formula, a 100 minus your age. So, you take 100 minus 65 and 65% of your income or your nest egg rather would be put into fixed instruments, the other 35% you use to protect yourself against inflation, and basically we did that. We had nice CD rates and not very hard after a CD matures to go buy another one five years out, living off the interest and never touching the principal. Well, that all works until something [INDISCERNIBLE] real estate market change and all of a sudden there, they ran out the banks with the first start bill and literally, I woke up one morning and opened my computer and had more cash in my cash account than I could have ever imagined and it’s almost like, “Honey, we won the lottery and you didn’t tell me?” So, I go into the history and find out that the, the banks have taken that money to put it in the economy. They took the money and basically paid off their debt and I had—there’s all kind of CDs, all called in within a two-or-three-day period. So, picture having at that point of my life, probably put a 70% of my retirement money and 6% and 7% CDs all getting called in and the best they can give was maybe 2%. So, you know, there’s like every time the CD got called in while we just lost another $400 a month, we just lost another $200 a month and I couldn’t replace the income. So, I had to do 180 as Benjamin Graham talked about going from passive investor to full parietal active investor, either that or I’m gonna have to radically change my lifestyle. So, I called up some mentors, the late Glen Kirsch of Asset Strategies and a few other people, and the first thing I said to him is government is spending money hand over fist. It may all cause inflation. I’m not sure I want to go on into anything that’s long term, treasury, or something like that. They all said, “Yeah, you understand that and therefore, you’re gonna have to put your money in different places in order to survive.” So, over the next three years of a lot of help, I became a full parietal active investor. I have money, you know, outside the country, seven different foreign countries, and all kinds of them. As part of the process, I started getting a lot of investment newsletters, Casey being one of them. Some of the other ones in the core group and several of them because I needed to get educated. I started writing these people, saying you’re not, you’re not relating to seniors, you’re not relating to savers, and I don’t know if you know David Galland, the managing editor from the Casey Group. That’s to the point where, you know, who became penthouse because he’s answering all my questions and then one day, he [INDISCERNIBLE] trying to work with seizure 100% right. We’re really not relating to the problems of your peer group, what don’t you take it as an assignment?
JASON HARTMAN: Yeah, you know, interestingly, that, that’s also so true on a governmental level because they’re inflating away the value of the currency and at the same time, the interest rates are so low. Those don’t necessarily go together. I mean, in the Carter era, at least because of Voecker who broke the back of inflation, you had higher interest rates now granted. It could be argued the real rate of inflation was higher than the interest rates, but that’s usually the case so ultimately, people are always moving backwards, but the government and the central bank is definitely not relating to savers either. I mean, this is what upsets me so much, Dennis, is that people who have done the seemingly right thing all their life, they’ve delayed gratification, they’ve saved money, they’ve put away money for a rainy day, they didn’t spend it all, they were responsible, and yet they’re getting burned by the system.
DENNIS MILLER: They’re getting more, they’re getting more than burned.
JASON HARTMAN: Oh, yeah. Well—
DENNIS MILLER: You know, let me, let me just reinforce what, what you said by some things since I’ve joined the Casey Group because they’ve asked me to help out with that person that you just described. The first thing I did was I went back and checked now what the CD rates. When my CDs were called in, my interest income was five times my social security check. If I was fool enough to have CDs today in the current rate, my interest income would be half of my social security check. So, that’s how much the Federal Reserve in the government has taken the money out of the hands of the seniors and savers who played by the rule. The other side of the squeeze is we got a social security increase this year. It was 102%, but our Medicare actually went up three times at a month. We did our survey of our subscribers and said, “Okay, we all agreed that inflation is not what the government is telling us. What do you think it is?” and it was incredible what happened. We had 3000 responses and we gave them one question, what do you think it is and then any comments at the end. Well, the composite number was a hair over 8% and I asked the people who helped us with the survey, “Can you send me an e-mail if you have any comments?” I had 96 pages of subscriber comments.
JASON HARTMAN: Wow! [LAUGHING]
DENNIS MILLER: 96 pages.
JASON HARTMAN: And then what was the upshot of these comments?
DENNIS MILLER: The upshot of the comments is we’re seeing it and everything. We’re seeing it in the downside note. You can go buy a can of tuna fish, but it went from 6 ounces to 5 ounces but it’s the same price and then some of them were pointing out astronomical increases that they are saying and [INDISCERNIBLE] so that they had this entire generation is getting squeezed on the income side and the inflation has squeezed them among the spending side and they have—they’re trying to scramble and figure out what to do and that’s what we’ve been doing since the first stopper.
JASON HARTMAN: Yeah, okay. Talk just a little bit more about some of the solutions to this. What can people do?
DENNIS MILLER: Well, the first thing is, I read an article recently. I am the believer that we’re all money managers now unless you got a pension from a branch of the government. Most of us retired at a 401K, you know, some sort of an IRA and regardless of how you played by the rules and you earned your nest egg. Now, it’s our job to make sure it lasts for the rest of our life. The employee of Benefit Research Institute just came out with their latest report and said, “Unless you work for the government, 3% of the people that are working now in the private sector have some sort of defined benefit plan.” So that anybody who hasn’t worked for the government gets their gold watch, gets their lump of cash, and they’re having to have to make that life savings last for the rest of the generation. The first thing they got to do is wake up. Our money will not manage itself. I got an e-mail from a 72-year-old subscriber a couple of days ago and she said she was really having trouble with the stockbroker. What fund or something could she put it in so she did not have to worry about it and my answer to her is I don’t know, well he said set it and then forget the investments today. They don’t exist. So, rule number one is you better take charge and start to get some education. Then, we can start talking about investments in the first of occasion then yield and dividends and appreciation, but I’ve seen one of the biggest problems as people are glad to wake up.
JASON HARTMAN: No question about it and it’s been a rude awakening and as, as horrible as it sounds, I think it, it’s gonna get a lot ruder in some cases.
DENNIS MILLER: Well, one thing you would appreciate with your real state background is my wife inherited part of a family farm that has been in the family now for 100 years. Nobody in the family is thinking about selling it. That’s one big, big hedge against inflation that it’s, in fact, also providing some income. That is one of the, one of the things that we’ve been very, very fortunate with because if you’re concerned about inflation, buying the right kind of real state and farmland was one of the first places to look along with precious metals.
JASON HARTMAN: And I think the farmland is more interesting than the precious metals conceptually, because at least, with the piece of property, you’ve got leverage, you’ve got tax benefits, and you’ve got the commodity value of farming. Of course, food iss the universal need, but there’s management and there are risk with crops and so forth but, you know, let me ask you about the metals for a moment. That’s what’s commonly thought of this, is the best inflation hedge Dennis, I, I will—those people think my view on this is a little bit odd and maybe you will too and feel free to take issue with me, but in all those being said before, I jumped into it, I invest in metals. I mean, I own gold and silver, platinum and palladium, and I, I think it’s okay. I, I purchased them and they’re a way to store wealth, to have a savings account that hopefully will not be the base as the dollar or whatever currency you—in which you live your life who is to pay, but at the same time, these are defensive strategies. They’re not offensive strategies. If you ask a metals investor, even the most stone cold gold bug, did your gold go up in value or did the dollar go down on value and most will say, well, the dollar went down and so, all you’re really doing is, is treading water, keeping pace which is, hey, it’s a lot better than losing, but it, it’s speculative. It doesn’t produce income. There’s no financing, no leverage, no tax benefits. In fact, the tax treatment is rather bad because its tax is a collectable at 28%, you know, and some other things there. So I, I don’t know. Your, your thoughts, I mean, I—there’s another scenario to the gold bug argument which is the, the sort of economic, the full on economic collapse, end of the world scenario where it maybe useful there, too, but without talking about the end of the world scenario, just talking about as, you know, a hedge against inflation if you will, any thoughts there?
DENNIS MILLER: Yeah. I didn’t reconcile it this way. I went to a Casey conference actually here in Phoenix back in 2011 and they had a lot of speakers and that was what they were are talking about. It was [INDISCERNIBLE] and what percentage of the portfolio do you have in gold and they will tell us and many of which, “I’m not selling my gold.” And finally, about the second day, I realized that the audience was not asking the speaker the right question because I look at gold and silver, and metals, uh, in a different way. The first part is what I learned from Glen Kirsch is what they called, a core holdings. Now, the core holdings is the metal that you have that if it all hits the fan, you’re gonna have to fall back on. Regardless of where the price of gold is, it’s like a fire extinguisher. You have it, you hope you never have to use it, so that I segregate in my mind what I call the core holdings from investment or profit holdings and that we have to really, in our mind, determine which is which because then if you wanna start looking at gold for appreciation, then you couldn’t have physical metals if you want or you can go into some of the more popular exchange-rated funds. Uh, you take uh, companies like Newman Mining. They’re an established company. They’re not out looking for gold. They’re harvesting gold. They’ve actually tied their dividend to the price of gold and I think that gold is a multipurpose, I said gold. I mean, metal is a multipurpose investment and we have to segregate in our mind what we’re trying to accomplish with it as opposed to I’m a gold bug. I, I don’t, I’m not a gold bug. I used gold and silver for different purposes and I buy them with that in mind, the gold doubles. I have certain investments I’m gonna sell. I’ve still gonna hold onto my core holdings.
JASON HARTMAN: Yes, so, so, when, when you, when you look at that, you know it’s kind of interesting about that, too, is the, the whole question of supply and limited supply and so forth, and this one is a little far-fetched for me to believe that I, I know it will happen someday but it just will not happen this soon. There’s a company that is raising money now and I hear it’s doing reasonably well. I can’t remember the name of the company, to send space crafts to asteroids to mine precious metals off of the asteroids and then—so I hear that, and then I read another article, just recently, talking about how earthquakes create new gold supply [LAUGHING] and, and then I look at technologies like fracking, for example, which have dramatically increased the supply of the petroleum energy product and I, I just wonder nobody really knows what the supply is and, and the way gold, silver, platinum, palladium, copper, pretty much anything has valued this by the good old economic law of supply and demand.
DENNIS MILLER: Well, that’s the second, that’s the second law [INDISCERNIBLE] because I’m very familiar with fracking and one of our best performing, uh, assets in our model portfolio happens to have some presence there in the bucket. The problem that you’re relating with is using the concept to fracking the gold is how expensive is it to get out?
JASON HARTMAN: Right, right.
DENNIS MILLER: In another words, not only, not only do you have your supply and demand issue, but the fact is if you got applied to an asteroid to harvest, didn’t sent it back, well, it has to be $50,000 or $60,000 an ounce before it’s economically feasible to do it.
JASON HARTMAN: Well, that, that’s why that seems a little far-fetched to me, but they must make the math work because maybe, it’s just laying all over the top of the asteroid and it doesn’t even need to be mined if you will [LAUGHING] the way it does on earth. I don’t know, I really don’t know much about them. It was just interesting that I heard of.
DENNIS MILLER: Yeah. My, my suspicion is maybe they’re better raising money than they are at finding gold [LAUGHING].
JASON HARTMAN: Well, that may be true, that may be true. And, and you know, another interesting concept here is diamonds and you look at diamonds as a commodity which, you know, isn’t traded like gold. It’s not viewed as money as much, but diamonds are now being made in laboratories and [LAUGHING] it makes me wonder, “Gosh, what does that do to the diamond investment market?” They’re, they’re literally the same thing. They’re not faked. They’re not cubic zirconium. They’re real diamonds. It’s just that they’re made in a laboratory versus mined out of the ground. So, do you, you know, just kind of some interesting thoughts there.
DENNIS MILLER: Yeah. We’re going back and read about how the [INDISCERNIBLE] two years controlled the diamond market.
JASON HARTMAN: Well, I thought they still did [LAUGHING].
DENNIS MILLER: Well, no, they controlled the law of supply and demand for many, many years and then they lost control of it. So, it actually turned into much of a free market and, you know, a banker has tried to do it several years ago, and you know, what was the old story wrote a book about how to be worth $500,000,000 and the answer was start with 2,000,000,000.
JASON HARTMAN: [INDISCERNIBLE] exactly [LAUGHING].
DENNIS MILLER: So, you know, if somebody tries to take control of the gold market, I, I don’t know, but they have enough money to be able to do that and that was one of the aspects, but you may be right. Some day, the supply and demand curve may change but right now, if we look at the history, in the history of man, gold holds its value better than most any asset that I know.
JASON HARTMAN: Yeah. Well, it’s certainly got a lot of history beyond it. The old saying is that 2000 years ago, you could buy a toga and a pair of sandals with an ounce of gold and today, you can buy a nice suit and a pair of shoes, so [LAUGHING].
DENNIS MILLER: Yeah, that’s right for sure.
JASON HARTMAN: But again, if, if that suit is made in Bangladesh or China, you can actually buy several suits for that ounce of gold [LAUGHING]. So, it depends.
DENNIS MILLER: I saw that it was working temporarily and then I lost the term paper, but it was when a Ford Mustang came out, you could buy a Ford Mustang for so many 1 ounce gold pieces and ironically enough, 40 years later, it took the same number of gold pieces to buy a Ford Mustang.
JASON HARTMAN: That’s so interesting, yeah.
DENNIS MILLER: So, it depends after it holds its value.
JASON HARTMAN: Yeah, yeah, so—but, okay, so, let’s agree on that, that it does hold its value, that it’s a great measuring stick for inflation and, and the base of the fiat currencies, but you’re still only to the point where you’re really treading water, right? I mean, that’s not really being an investor if you will. It’s being saver and hey, being a saver is better than not being a saver and if you can save in something that doesn’t lose value, the dollar loses value, we’re sure of that. I mean, history has proven—
DENNIS MILLER: Yes.
JASON HARTMAN: That every fiat currency ultimately loses value. There’s, there’s no exception whatsoever to that one.
DENNIS MILLER: Well, I think people, I think people make this mistake. Gold will hold its value, but we have fixed our portfolio so that they are speculated. Now, understand that our peer group is baby bloomers and those that have retired, but we’re telling them not to put more than 2.5% to 5% of their portfolio into speculation. Well, you know, if you go into gold, if you go in the high tech, you could go into a pharmaceutical company that has just discovered the highest new pharmaceutical therapy or whatever. You had the possibility to double and triple and 10 times your money if you hit the right company, so that when you are looking for the appreciation factors opposed to savings, gold is one area and one sector to look at, but there’s a lot of others sectors that we can also look at, you know, the right kind of realistic being one of them that we are stating there trying to show our, our investors how to allocate their portfolio, so that they can get that, uh, appreciation without being overloaded in one sector. In other words, if somebody said to you, “I got 2% of my investment for portfolio and both,” you wouldn’t think anything of it. It would be more if they put too much of it in speculating in gold for appreciation as opposed to core holdings that they would really be at great risk.
JASON HARTMAN: Right, I agree, I agree. So, you surveyed readers about inflation in your newsletter, what are they thinking just a little more on that?
DENNIS MILLER: Well, I’d say what they’re thinking and it was—I wrote an article to some on my website about it, called Reading the Tea Leaves. Let’s go back to the, my generation, our paradigm. We sat down and figured out retirement planners. The retirement planners said favor 60% for appreciation, 2% for inflation. Well, that’s now out of the window.
JASON HARTMAN: That’s hilarious, 2% for inflation?
DENNIS MILLER: Yeah.
JASON HARTMAN: [LAUGHING]
DENNIS MILLER: That was, that was whenever—you know, I filled out my first one years ago when I get a PC jr and had some sort of a program to do it and it said, if you’d keep an eye to what you’re doing, you’re good until, you’re gonna be 125 years old and I thought, well, I can make it, you know? And now, that level to another rule of 60% and 2% was how much can you take out of your IRA to supplement your social security and still not be chopping the principal, when you’re factoring in inflation while all the number less 4% and that was if you grew 60%, you had 2% inflation, you take out the other 4%, supplement your social security, and you’re good to go. I did that for the first four, five years of my retirement with no problem. The real message now is if you believe it’s 8%, that meant you better be earning 12% if you’re gonna keep your nest egg up with inflation and still throw off at 4% in order to survive. Now, tell me that investors are saying they’re looking for a set-it-and-forget-it investment, those don’t exist. You better be actively, actively managing.
JASON HARTMAN: That, that is a great point and I, I think you made a great point there, Dennis. I don’t think there is any such thing as a passive, a truly passive investment.
DENNIS MILLER: Not anymore.
JASON HARTMAN: You know—not anymore. You know, if you, if you give your money so some guy at Merrill Lynch or Ameriprise or one of these big brokerage firms, first of all, you gotta have your head examined in my opinion but second, you need to learn about stuff. You need to stay engaged, you need to be reading all the right papers, and, and looking at all the right media, and paying attention to things. The world just does not—the way you can just have a set-it-and-forget-it investment. Every investment needs to be active.
DENNIS MILLER: I totally agree with you. As a matter of fact, you know, we have a free site and paid site to our service. In our paid site, we sat down and did a subscriber survey and said, “What you want us to write about?” and they wanted things about income. We’ve written stuff on reverse mortgages and the new reason, one of the things that they asked us and we actually did this, for an entire monthly issue was how do you find good professional help to help you manage your portfolio and, you know, as you said it, you’re gonna it there, you’re gonna have to have your head examined. That was one of the most eye opening issues we ever had; how do we get good professional help that’s going to help us shed 12% or better.
JASON HARTMAN: Yeah, do you? [LAUGHING] I mean, does that exist? I’m not sure it even exists.
DENNIS MILLER: Well, what happened, what happened was there was an article on Motley Fool which really exposed, but then the bottom line for the listeners is the difference between what they called a fiduciary relationship and a suitability code of standards and the stock brokerage have suitability. There are good people where you can have a fiduciary relationship with. What we’ll put into our newsletter was what do they look like, how do you find them, how do you interview, and how do you measure?
JASON HARTMAN: Yeah, but here’s the problem, Dennis. Even if, even if your broker is a good person, a good ethical person and a confident person, they’re still investing assets of which they don’t control. You can’t control the board of directors of the company from skimming all the profits off the top. You can’t control the CEO level executives from giving themselves huge bonuses, you know, and backdating options. All of these things affect the shareholders, so there are just too many layers; that’s the problem. The investments are just out of one’s control. That’s what frustrates me about the way the system is.
DENNIS MILLER: Well, and you know what? You’re expressing the concerns of my entire generation and therefore the reality is, as we are learning how to diversify not only that we classify them as speculative. They’re a little bit more secured, but how to also diversify them or cross sectors so that you have the shot of getting a good return but at the same time, you are limiting your risks for just those reasons that you are one.
JASON HARTMAN: Exactly. So Dennis, what is your outlook for the future? Many, many voices out there are concerned about hyperinflation. There is no academic definition for hyperinflation in terms of what percentage that is, but—and you know, then there’s a few people and there’s very few talking about deflation, not too many people saying that. What are your thoughts?
DENNIS MILLER: I appreciate you asking it. I think I want to temper it first by talking about my background. I was the market that came to Casey Research with the need and they said, “We’ve got the greatest research company in the world and I kinda agree with them at this point. We need you to help us understand the market better and connect with them. So I’m not giving this to you from an academic role or economic background. I’m giving you extremely experienced of our guy who is almost 72 years old and has been an investor for a long time. I can’t sit here and say whether it’s gonna be inflation or hyperinflation, but I know one thing. 8% is a realistic number and that even if there are 8%, 10%, 12%, it’s going to wipe out seniors and savers because the government is not going to tip off of it as far as ourselves and security is concerned and I get asked this question a lot because they say, “Well, what you gonna do to protect yourself against hyperinflation?” My answer is, I can’t predict the probability of hyperinflation any more than I can predict, the probability of your house burning down but I know one thing. If either one of those happened, it’s a very traumatic financial experience and just like you have insurance against your house burning down, a prudent investor today better be having some sort of allocation to their portfolio and those kind of investments are going to help whether it’s inflation or hyperinflation. I can’t predict the probability of the event, but the catastrophic consequences are so high. Uh, a prudent investor better take that into consideration and I think it’s gonna be high for a while. I can’t say how high.
JASON HARTMAN: Yeah, yeah, I know. I, I totally agree with you. I mean, if you’re saying it’s 8% now, I mean, I’ve been saying it’s 9% to 10% now. The reported numbers are absurd. The only area where there’s really true deflation is in technology, but we did an article that said, uh, when the iPad came out, I can’t eat my iPad and, and then, you know—
DENNIS MILLER: Yeah.
JASON HARTMAN: I saw, I saw another article with a similar title to that and I thought, did they copy us [LAUGHING], or, or we’re just thinking alike? But, but, yeah—no, it’s, it’s really a scary thing. I mean, this can, this is just going to—this inflation that is already happening that may get a lot worse—who knows or, you know, and who knows when—is going to devastate 250,000,000 people in this country. We’ll just say that the other 60,000,000 are positioned to better themselves and it’s going to actually benefit them. And one of the things, Dennis, I’d love to get your take on and it’s the last maybe concept we can cover here is how inflation—of course, we know it destroys, it’s pickpocket, it’s a thief. It destroys the value of our savings, our stock brokerage accounts, our bonds—bonds are terrible with inflation—and destroys the value of equity in real estate because we have a million dollars equity and a property and there is inflation. That million dollars were to last. Now, the real estate may hedge the inflation, hopefully; but the good side of it is that it also thankfully destroys the value of debts and if you look throughout the history and, and again, this is perverse. It’s the way it should be, but the, the debtors actually kinda win in inflationary environments because they paid back the debts in cheaper dollars.
DENNIS MILLER: In particular, the biggest debtor of all being the government, right?
JASON HARTMAN: Yeah. Well, that’s their business plan, you know. They’re doing it to China and I gotta think that China is gonna get pretty upset about this ultimately. I mean—
DENNIS MILLER: Well, you, you’ll notice that China and Russia are buying global—
JASON HARTMAN: Yeah.
DENNIS MILLER: Or whatever that means.
JASON HARTMAN: True.
DENNIS MILLER: One thing I’d like to, to deal with that and, and then I also have, uh, an offer—with you permission, I’d like to offer to your listeners.
JASON HARTMAN: Absolutely.
DENNIS MILLER: The debtor is going to win in a high inflationary environment. We’ve got 10,000 baby boomers a day, retiring every day for the next 19 years. The majority of the baby boomers now are seniors and savers and not the debtors, but they were back when they were buying mansions in their 20s. So that and the fact what you’re talking about is a huge, huge transfer of wealth from our largest generation that needs that to survive. So there’s gotta be some real solutions that—
JASON HARTMAN: Oh, sure.
DENNIS MILLER: People don’t get with it and you know, you’re 100% right. Then, therefore, it’s [INDISCERNIBLE] us back to where we started on interview to make sure they were on top of things which is looking after our self because nobody’s gonna be [INDISCERNIBLE].
JASON HARTMAN: Yep, no question about it. So, you wanted to mention an offer for our listeners?
DENNIS MILLER: Yeah, yeah. I appreciated the opportunity to [INDISCERNIBLE]. If, if your listeners will go our website, uh, www.millersmoney.com/freebook, we would like to offer them a couple of things. One is, if they go on in that website, they can get a free e-copy of the books. So, that you’re gonna [INDISCERNIBLE]—it’s basically my story of how I went from a passive to an active investment. In addition to that, every Thursday, we publish an article on all kinds of topics, much of what we talk about today, and that’s free, and that will hit their inbox, and—then we also have a paid site which is very inexpensively views the money portfolio, shows them how to allocate their investments properly so that there are not too high of risk in any one sector, uh, those concerns that you express pretty well for us. So, it’s www.millersmoney.com/freebook, and they can download the copy of the book and see what it’s all about.
JASON HARTMAN: Sounds good. Hey, Dennis, thank you so much for joining us today.
DENNIS MILLER: Well, I enjoyed it. Thank you very much.
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