Jason Hartman starts the show by talking about traveling mid-pandemic and questioning if the housing market will crash. In the interview segment, he hosts the editor of Extreme Value and host of the Stansberry Investor Hour Podcast, Dan Ferris. They discuss conspiracy theories, where the economy is going, and Warren Buffet. They also talk about the government’s role in the shifting economy and how long the stimulus can work before it stops working efficiently.
Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multimillionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in 1000s of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:53
Welcome to Episode 1615 1615. And thank you for joining me today. I don’t want to forget, I hope you had a chance to listen to our last episode flashback Friday of Walter E. Williams. He passed away age 84. Excellent. Economists talked a lot about African American issues. And he was skeptical of these government programs and anti poverty programs and a real scholar just just a great guy. Anyway, that we had him on the show a couple of times. And on flashback Friday, just the last episode, we replayed one of his somewhat recent interviews with us on the show. So check that out. Make sure you don’t miss that one. It’s a good one. Anyway, today, we have an exciting show for you. And I’m not going to tell you too much. You just have to listen to it because it’s good stuff. Also, I I traveled. No, I can’t believe it. I went on an airplane first time in 10 months. Huge record. I’m back home now. And got back Friday evening from St. Louis, where I attended a conference there. And who was there? Oh, a bunch of my friends were there. But one of them was our asset protection and estate planning attorney. One of our clients just asked about another attorney today. And it made me think of him. And if you haven’t already checked out our webinar on that, check it out at Jason hartman.com. Slash protect Jason hartman.com slash protect. And for extra credit. Yeah, we give extra credit here at Jason Hartman University. And we don’t put you into student loan debt for the rest of your life with a degree that nobody is hiring for. See all of our education here is number one. It’s mostly free. And certainly free on the podcast and the YouTube channel and the webinars. And then you go out and actually create wealth with the stuff you learn here. Isn’t it good? Isn’t it good? Yes, it is. It is good, good stuff. So check that webinar out. And for extra credit. I also want to remind you, our Alabama webinar is replaying this week. Jason hartman.com, slash sweet home. No need to put Alabama after that. Just Jason Hartman, calm slash sweet home and the estate planning and asset protection at Jason hartman.com slash protect. You know what, I don’t want to steal the thunder of this interview today but you are going to like it. Our guest is from Stansbury research. And it’s Dan Ferris, you’ve may have read his great writings out there. He’s, he’s good. And he has a lot to say about the housing market. Is it going to crash? Is it going to crash? varicose the bomb dropping the bomb dropping on the real estate market? Well today, I interviewed for later playing it’ll be coming up maybe next week. I interviewed the president of the National apartment Owners Association. He was back on the show had some incredible things to share about rental housing rental housing, demographics, eviction, moratoriums, Federal Housing Assistance Programs. That’s all coming up on the future episode. But today, Dan Ferris is going to teach us some good good stuff. So I think you’re gonna really enjoy this interview. And here’s Dan. It’s my pleasure to welcome Dan Ferris you probably heard his name out there. I’ve been reading his work for years. He is editor of extreme value at Stansbury research, and the host of the Stansberry investor hour podcast. Dan, welcome. How are you?
Dan Ferris 5:12
I’m great. Great to be here. Jason,
Jason Hartman 5:14
it’s good to have you on and you’re coming from Vancouver, Washington, right?
Dan Ferris 5:17
That is correct. Yes.
Jason Hartman 5:19
Sunny Day,
Dan Ferris 5:22
rare sunny day.
Jason Hartman 5:23
Good for you. Good for you. Well, hey, we appreciate you spending some time with us. Dan. I guess I’ll start with just asking you about your overall take on the economy in these very tumultuous times. Seems like we’ve got a divided economy, a very uneven recovery, if we call it a recovery, and you know, your expectations for the future, I’ll just kind of let you take it where you want to start?
Dan Ferris 5:48
Well, first things first, it’s been an insane year, and we have this enormous contraction this as far as the depth of the contraction, like 1930s, depth, obviously, a lot faster. But but that kind of depth. And as you say, it’s bifurcated, isn’t it, there’s, you know, one part of the economy has really took off, right, the stay at home portion, then hospitality and other things are just being crushed. And my fear is that I’m very confident that there, we’re not going back, you know, pre COVID, we will never see that again. And, you know, among other things, it’s, it’s really no great controversial statement to suggest that a lot more people are going to work at home. COVID are not virus or not. And, you know, it just won’t be ever be the same again, and travel is the one thing that kind of drives me a little bit crazy, because I think we could probably have a lot less restrictions on things like travel and eating out and all that. But then in the meantime, you can hardly go anywhere. I mean, it’s it’s a pain in the neck. And it’s really depressing economically. So,
Jason Hartman 7:01
I think and I think the opportunists, the tyrants in government are using this as a fantastic excuse for them to just intrude into our lives, gain more control over us, and do a lot of very unconstitutional things, you know, right to assemble, right to associate, I mean, nobody talks too much about our right to associate with whomever we want. But soon, there’ll be contact tracing everywhere. And just I mean, this is a dictators dream, it’s just, they must be loving it right now, the tyrants that are control freaks, right?
Dan Ferris 7:40
It is, it is a dictators dream, and the playbook. Is it people like us, Jason, it seems so obvious. But what I hear from, you know, people around me just, you know, people I see from day to day, they think, well, we all need to wear masks or need to be careful, and we can’t, you know, see each other on Thanksgiving or whatnot. I just think this is insane. It’s amazing that there are as many voices as there are in the medical community saying this is ridiculous. It’s absurd. We’ve shut down the country for nothing. But you don’t you hardly ever hear them. You know, you want to hear like that person once a week on like, Tucker Carlson or something like that, or maybe like you on your show, but but you don’t hear those voices, and they’re credible voices that need to be heard.
Jason Hartman 8:31
Of course they are in then, you know, it’s interesting, you know, everybody loves to bash conspiracy theories. But the reality is, there are conspiracies all around us all the time. And what I like to say is that the great conspiracy of you know, original Collin colonists, conspiring against England. I mean, it was a conspiracy and it was a great one. So you know, what I mean? Would they have been called conspiracy wackos with tinfoil hats or Founding Fathers now? Yeah, they would have
Dan Ferris 9:01
been called militia, you know, by the current current lefty crowd, but but you’re exactly right. People know that when they aggregate their resources, they become more powerful. They know that if they’re very modest means, you know, and they know that for sure. If they’re senti millionaires and billionaires and well connected people in government, they know. They understand what it means to aggregate power and push other folks around. And they do it’s not. It’s funny that we have these terms conspiracy theory, because who doesn’t
Jason Hartman 9:38
know that this is how human beings behave. It’s a little absurd, right? No, is it it is totally. And the conspiracy point that I wanted to make is that it’s hard to argue that the mainstream media isn’t a coordinated effort. Because, like you were saying, you see so few dissenting voices in the mainstream media. They all sort of published the same headlines in lockstep. It’s amazing how coordinated it is, you know, whether it be mainstream media or social media and big tech, which I’m lumping all of those together, you know, the big tech is probably the most abuse of all. It’s like they’re coordinating the whole story, the whole narrative is, is it’s the same, you know,
Dan Ferris 10:24
I agree with you. But I heard something recently that rang true navall raava Khan, the, you know, angellist, entrepreneur and sort of philosopher, he, he was talking about all this. And he said, you know, though, if you look throughout history, like technology, technological advances, society tends to lean left at these times, you know, so, and when, when we look at the media, it’s completely technologically driven, right, the ability to reach more and more people is strictly a function of technology. You know, we went from print to, to TV to Internet, and it just got wider and wider, and it means harder and harder and harder left, as that happens, right? When we were a print culture, I think we were we were a lot more reasonable. We have plenty of so called progressive ideas and things and, you know, you know, then radio came and TV came and internet came on, we had we just lean harder and harder left. So I don’t think you need, you don’t need an outright, you know, conspiracy of some meeting clandestinely, but it leans that way. Anyway, it’s so very obviously leans that way, that you can’t dismiss it. And nowadays, I see I’m somebody who says bad ideas are on the right, bad ideas on the left. You know, the government wins every election and the voters lose every election. So I don’t really that’s a good way to put it. Yeah.
Jason Hartman 11:48
And regardless of which political party wins, the government always wins.
Dan Ferris 11:53
Which party is going to is going to run on shrinking the government. Yes. Nobody wants that at this point. That the electorate is thoroughly been inculcated, you know, we had these big leaps forward, basically, after the Civil War, and then after the Great Depression and World War Two, and, you know, we’re thoroughly inculcated with this idea that government needs to do everything. So now the electorate is all about, hmm, which one of these guys is going to give my group more stuff? Yeah, you know, and it’s group right. It’s become pure collectivism. No matter how you slice it, there’s no more place for the individual. So
Jason Hartman 12:30
collectivism at the lobbyists level. It’s the corporatocracy collectivism. And, you know, that dinner that Gavin Newsome had the other night when he broke the rules, and, you know, completely just disregarded everything he tells everybody else to do. You know, it’s unbelievable.
Dan Ferris 12:48
I mean, I certainly have no problem with people coming to the restaurant not wearing a mask. I don’t care. However, it is typical hypocrisy, you know, for the the rules or for the
Jason Hartman 12:58
Yeah, of course, and Nancy Pelosi had her hair salon and all the rest. But let’s talk about what this means financially to us and where the economy is going. We started out talking about how it’s it’s uneven. Is there a movement that I mean, you know, like, do we need to worry about a bank collapse? At the beginning of this? I was quite worried about that, you know, I entertained it for a short time. I mean, I didn’t stay very worried about it. But, you know, the FDIC certainly can’t insure all the deposits not even close. But it just seems like no matter what the answer is just print more money. You know, that’s the way out of everything. And Jerome Powell has been extremely transparent. I mean, at least compared to Greenspan, about, you know, just look at whatever you need. Rich, Uncle Jerome is gonna print it for you. What does that all mean to us? Well, yeah, I
Dan Ferris 13:49
mean, he recently said, you know, we can do more, and Congress needs to do more in no uncertain terms. And mudguard is saying the same thing over in Europe. So you know, the fiscal stimulus needs to be greater, and the central bank will do everything it can and all that. So that is happening. But if you’re going to talk about the kind of, you know, talking about a bank collapse, and the FDIC, and then you mentioned money printing, and that is really, that’s if you want to think in terms of economic deterioration, it revolves around the ability of the Federal Reserve to print money and, and the scheme at this point is still the basic quantitative easing scheme. We return on the computer. We, we, you know, create money out of thin air and then we buy securities with it, and we buy right now we’re buying debt. The Federal Reserve is buying debt securities, including corporate debt, and ETFs and things bond ETFs. So, you look at that, that is actually a deflationary act, because what you are doing is you are swapping, you know, the Fed, they don’t buy securities because they’re saving up for retirement or they’re, you know, they want to have a portfolio of securities, to borrow money against to create a business they taking them out of the system and putting them on their balance. And effectively the income disappears from the system. And now they’ve exchanged that for just $1 of reserves, it just sits there. And if it isn’t lent and spent, you don’t get the very obvious, you know, inflationary rise in the price of things, assets, wages, etc. Right now, these operations really push the bond market around that pushes interest rates around and it has some kind of an impact on the on the stock market as well. Although that I recently saw a paper there was an article in Barron’s that said, Yeah, the Fed put is real. But it really only is effective after you know, in the time someone after a collapse, you need that downdraft for the market to really lean heavily on the bed, see, come on, do something, and then we’ll start buying again. So what I was, I expect this to continue, I expect the Fed to keep the Bank of Japan playbook going, and maybe even go that one step further. You know, back in Japan, they were buying equities. I think they may still be I haven’t kept up with that. But that’s the that’s the playbook, right? print money, buy securities, buy bonds, then buy corporate bonds, then buy equities today. So
Jason Hartman 16:10
that’s the that’s the Bank of Japan playbook. And does it include 230% debt to GDP ratio eventually?
Dan Ferris 16:19
Well, yeah, who cares about those numbers anymore? Right? That’s Oh, Jason, you’re looking at the wrong numbers, you’re worried about the wrong stuff? It’s how fast can we print more? We need to do more. That’s the number they’re worried about. Right? Oh, $7 trillion balance sheet. They’re like, you know, we’re gonna need to jack this sucker up to 10, or something. That’s what they’re worried about. But yeah, yeah, that comes with lots of lots more debt. And as Lacey hunt, and the folks in Boise been pointed out, as they have for decades, you know, what happens is you we are to the point where you get some more debt, that marginal investment from that debt is less and less and less productive. So this whole thing, it’s just one giant, they’re trying to stimulate, but the tool is not fit for the job, the tool of the central bank is not fit for the job of stimulating economic activity, when it is fit for a stimulating depression. So then what happens? Well, they have a hammer in one hand and a mallet in the other. And they say, well, we, we broke it with this, we’re gonna fix it with this. So they just keep printing more. And at some point, they will figure out, somebody will figure out how to do something like perhaps a Fannie and Freddie for corporate debt, let’s just say where they guarantee, you know, the Fed, maybe or some other agency guarantees corporate debt, oh, then it’ll be lent and spent, then you’ll see the asset prices and the wages and the price of goods and services going up, you know, it’ll happen, they’ll do it, they’ll push this thing around as hard as they can, until they actually see inflation ticking up, you should take them at their word, when they say that that’s what they want to do.
Jason Hartman 17:57
Yeah, they do want that. And they want a great reset, which maybe we can get to that. But then plain to everybody. Why, and I agree with you, by the way. But why is it that the debt stops working? Or the stimulus stops working at a point? You mentioned that it gets less and less effective? Yeah, I mean, I think a good metaphor for it. But you know, I’m not exactly sure. I can explain it financially as well. But from a biological perspective, I’ll explain it with caffeine, right? You know, if I drink three cups of coffee, today, I’m going to have some good energy. And you know, I’m going to perk up, and you know, it’s good. But if I drink 17 cups a day, it doesn’t work anymore. In fact, it has counteractive, negative effects. Same with sugar, right? And same with, you know, addictions like alcohol and drugs, right? You know, a little bit of it, you know, you have a few drinks, you’re good. But, you know, five drinks, and that’s really counterproductive, right? So what why does it happen with the Fed and the Treasury and government debt? What what’s happening there that makes that true?
Dan Ferris 19:01
Because they are pushing money on the system that might not have anything to do with it. I mean, there’s only so much investment at any given moment in time, there’s only so much investment that any, you know, the entrepreneurs of the world want to see happen. And if you say, Well, you know, all the investment is done. I mean, this is hypothetical, obviously, a multi trillion dollar economy is a much more complex thing, but let’s just simplify and say, okay, all the investment in the world is done at this moment. And then the government says, Well, we need more growth. So can we just give you the money for free or, you know, at a low interest rate, which is exactly what’s happening now? Oh, well, sure, sure. You give me some cheap money and maybe guarantee it, then I got a couple of ideas. So the quality of investment just gets lower and lower and lower. And basically, it’s, it’s like, it reminds me of the way people behave when they win the lottery. Right. Five years later,
Jason Hartman 19:58
we’re in the dot first.com bubble, I think would be the perfect metaphor. Right? Right. He’s venture capitalist just threw money at these stupid ideas. And, and the companies I visited a lot of them 20 years ago. And you know, they have the Ferraris and Lamborghinis in the parking lot. And these guys have the most tenuous dumb ideas franklin.com pets.com
Dan Ferris 20:22
p pod grocer.com. It
Jason Hartman 20:24
was a sock puppet and a web van. And there were worse. I mean, there were worse ideas than that, either. But yeah, they were just they had beautiful office furniture and lavish parties. And, you know, they just couldn’t figure out how to spend the money. It made them very undisciplined. You know, it’s like spoiling your kid, right. Same idea.
Dan Ferris 20:42
Yeah. And you know, what’s happening right now? Well, you know, all the big hedge funds are longer on stocks than they’ve been in a long time. And people are buying more options. As speculator, you know, the Robin Hood crowd and everybody are buying more options. People are opening more just regular online brokerage accounts. And it’s super duper frothy. And of course, the s&p 500 is like 2.6 times sales, which actually, that metric correlates extremely well with, with future 10 year returns. You know, it’s higher than it’s ever been higher than the.com p higher than the 1929 Peak. This is the most expensive market ever. And I think it’s partially that way, because as the Barron’s article pointed out, the Fed put is real. And the you know, we we hear stories of people gambling in the market with their stimulus checks as well. But I think the Fed put and the confidence that that gives people it’s real. And man, you know, we’re 60% off that March bottom right now. It’s just been like, a rocket ship. And it went from, hey, this is not a bad opportunity here to this is the most insanely VAT overvalued market in all of history like that. It’s crazy.
Jason Hartman 21:59
Okay, so it is overvalued,
Dan Ferris 22:01
without a doubt, without any doubt. Jeremy, you know, as Jeremy Grantham says, This is the third real McCoy bubble he’s seen, you know, in the past couple decades. And those people study bubbles, they studied a few dozen of these things they know from bubbles. And then he says, This is it. This is one, it’s been crazy. And he’s right.
Jason Hartman 22:22
So does that mean tech stocks? Does it mean the s&p does it mean the entire economy? Yes, I don’t know. That means inexpensive bread and butter housing. I think that’s pretty sound still, but it’s going up. It’ll probably reach a bubble at some point. But right now, it housings cheap, because interest rates are cheap. You know,
Dan Ferris 22:42
right now, I could if I wanted to really nitpick with Jason, I could take issue with the idea of valuations based on the level of interest rates. But housing, you’re right, and
Jason Hartman 22:53
I would just pick with you to I agree with you because it is a credit based asset. But the here’s the funny thing, though, is he Real Estate’s a little different. And here’s why I know the famous last words This time, it’s different, right? I’m not saying this time, it’s different. But the thing you’ve got is you’ve got these people that take out these three decade long mortgages where they don’t pay them off till 2050. Oh, my God, that’s incredible. Right? The rates are negative today, in real terms, no one could argue that we have negative interest rates, no one except the Keynesian Democrat, right? They could probably argue with, right? But they would be wrong. So all of those people in the know know that we have negative interest rates, right on mortgages for three decades. And you have this safeguard where you never have to get a margin call. You can even if rates go up to 14 18%. All those people that have those incredibly low mortgage rates that just makes the value of their properties even higher in the new properties. No one will be buying more properties because rates will be so high, right? The current properties, people will just keep them like they keep a rent controlled apartment.
Dan Ferris 24:05
Exactly. Same set. Yes, exactly.
Jason Hartman 24:08
Yeah. So like one of my team members, he has a rent controlled apartment in San Francisco, that he and his wife got in 1996. And it’s now probably worth like, $1.7 million or so. They pay 20 $400 a month, I think, okay, like they’re never given that thing up.
Dan Ferris 24:27
No,
Jason Hartman 24:28
but they really want to move. Like, it couldn’t be nicer. You know, the problem with those rent controlled places, the owner never has any incentive to fix them up, you know, so why would they fix them up? They’re not going to get more rent. So there’s just capitalism works both ways, right? You know, that people with these cheap rates that never get called in for three decades. I don’t know what is different. Go ahead and nitpick. I’m like, No,
Dan Ferris 24:53
no, it’s fine. I agree with you what what a rational person do presented with interest rates at this level. Well, if the money’s cheap, we traded for something that you think is going to be valuable in 30 years, if you do exactly this, and and it is exactly correct. I, I, you know, I think the real nitpick that I that I have is really with Warren Buffett, who kind of moved the goalposts and so well, you know, he used to look at market cap to GDP total US market cap to GDP that’s higher than it’s ever been in history. It’s pushing toward 170%. It’s never been there before. It’s like 166. Last time I look. Yeah, hugely high. And then he stopped talking about that, and it got too high. And now he says, Well, you know, if interest rates stay this low for a long time, stocks are a big deal today. And that’s a big F in my book. That’s a real big F. And it’s not the way to think about the value of the cash flows at all in my opinion. This will be continued on the next episode. Thank you for listening and happy investing.
Jason Hartman 26:00
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