What comes to mind when you think about our economy and real estate market trends? What new market bubbles should you be aware of, and is the market in danger of a massive drop?
Jason Hartman, self-made multimillionaire and entrepreneur discusses the current market conditions (and much more). Hartman’s experience and expertise have gained him success in investing, lending, developing, and properly managing properties. His guest is Dr. David Collum, a professor of chemistry and chemical biology with the Betty R. Miller Department at Cornell University. Together, they discuss various issues, such as Dr. Collum’s preview into his year in analysis for Peak Prosperity, and libertarian vs socialist issues on college campuses.
The 5 Year Contest Entry Website
Before delving into the essence of the podcast, Hartman announces that a new contest is available on his website at jasonhartman.com/contest. This contest is designed to advance your real estate and investing careers while helping you build a strong real estate portfolio.
Follow three easy steps involved in the contest.
Step 1: Create video outlining your five-year plan. It only has to be a few minutes long, and can be as professional or casual as you desire. In the video, highlight a couple of these questions:
Where do you see yourself in 5 years?
What are your goals regarding your investments, family, finances, and professional career?
Practice, if you will, future pacing by mentally putting yourself into the future. As a human being, you are not only capable of putting yourself into the future, you’re also capable of self-authoring your own future.
Step 2: Share the video publicly to YouTube. You can title the video as you please, but for easy navigation, please include in your title, “Jason Hartman 5 Year Plan Contest.”
Step 3: Win a prize.
The prizes for the contest include the 1st Prize worth over $4200: a Meet the Masters General Admission ticket (worth $797 now), a $500 cash travel allowance to attend the Meet the Masters event, and a Venture Alliance Mastermind Weekend, worth $3000. This year is the 20th anniversary of the Meet the Masters event, so attendance will be extraordinary.
2nd Prize is a single admission to Venture Mastermind Weekend and a new, 2nd Generation Amazon Echo.
3rd Prize is an Amazon Echo.
In mentioning the Amazon Echo, Jason also invites viewers to check out his other podcast, “Jason Hartman in the Hot Seat” by asking the Alexa app to play it.
The Merits of Price Gouging
After Hartman introduces his guest Dr. David Collum, joining him from Ithaca, New York, he revisits the list of topics to be discussed, and Collum begins with an explanation of his Peak Prosperity Year In Review. He states that it began as a few paragraphs he’d write each year for friends and associates, covering topics that catch his fancy. It wasn’t until 2009 that he began writing the Year In Review seriously. At this point, it has become quite lengthy, discussing every conceivable topic Collum decides to cover regarding what has occurred that year.
Hartman opens the floor to invite Collum to rant about an event, and the discussion shifts to focus on the merits of price gouging, and why laws regarding price gouging are harmful. According to Collum, these laws are dangerous in the idea that they create shortages, keep goods and services from coming into the area they’re most needed, and they prevent the rational distribution of said goods and services.
Collum states that cross-checking his information for accuracy has become more difficult, and that it is getting harder for him to remain confident in writing truth. He states that one example of his struggle has been brought on by the political mess between the United States and Russia, especially the relationship between Russia and our political parties during the past election. Collum notes that it seems resolving collusion between Conservatives and Russians is very small in comparison to resolving collusion between Democrats and Russians.
Hartman clarifies by referring to the 2016 campaign against former presidential nominee Hillary Clinton for her role in a uranium sale involving Russia.
“You’re talking about the uranium and Clinton Foundation that always seems to get richer off of everything, all the time. It’s unbelievable. These Clintons… got their tentacles everywhere.”
Collum clarifies that he wrote about this story between one and two years ago, and just this year the events involved returned to headlines and the story came unwrapped regarding how many insiders were involved in the incident. Money was transferred between an unnamed republican primary candidate, and the DNC began paying for fake dossiers, the uranium story was investigated by Robert Mueller (who was also investigating Trump), and it was discovered that money also transferred through the FBI.
“It’s getting very dirty. And then Donna Brazile comes out…and writes this unbelievably charged story about how Hillary basically controlled every penny inside the DNC prior to her being the nominee, which meant that she was the presumptive nominee by every definition.”
The Issue of Free Speech on College Campuses
Hartman asks, regarding the political conversation, “Can you even mention this kind of stuff on a college campus without being tarred and feathered or shouted down?”
He explains his question by mentioning some of the politically angry groups of students in colleges today. He notes that his mother attended Berkley in the 1960s, when the modern free speech movement began, and the changes regarding what students are calling “free speech” couldn’t be farther from what it should be in actuality.
Collum, a professor, interacts with students daily, and according to his views, it is a very loud minority of people that are conducting loud and often violent demonstrations regarding their take on what free speech entails. He states that it is a constantly changing landscape, with young people in who have the best opportunities available to them, yet they’re angry about something. He takes time to ask himself, “why are these students so angry?”
He states that the reason why such a small minority are permitted to have such a loud, and potentially destructive voice is largely due to cowardly administrators, or those that are politically extreme themselves. They are failing to take control and enforce the true nature of free speech.
When coming into the topic of violent protest groups, Collum clarifies that Antifa is not a student group as Antifa consists of mostly non-student adults, so he does not count their antics in his review of student protests. He does mention that the student groups protesting free speech seem to believe that free speech should only be considered free speech if they agree with it. He states that this argument has actually been brewing for decades, but that the sense of entitlement has come to a head now.
Answering Hartman’s original question about the ability to talk politics on college campuses, he says, “yes and no.”
“A lot of times when you hear about a professor getting in trouble for saying something, if you read between the lines, you discover that the person in trouble is actually a lecturer, not a professor. Lecturers are very vulnerable. Professors, real professors, are tenured and tend to not be as vulnerable, but you can be attacked.”
He emphasizes this by mentioning a personal experience he had with a smear campaign directed at him when he played a central part in a labor dispute and the union was voted down. Union organizers conducted the smear campaign and it did damage to his reputation, despite having law school friends come to his aid. Opinions did change about Collum and his character due to the campaign against him.
Hartman answers by saying, “These are the groups that report to be the tolerant ones, the open-minded ones. Nothing could be further from the truth, and what is also shocking to me is this…complete lack of critical thinking.”
Administrators Need to Grow a Backbone
Hartman recalls being bashed on the internet for the most innocent of comments, that far-left protestors will turn into a massive violation of political correctness. He finds it unbelievable that people can truly hold these kinds of volatile, easily triggered beliefs.
“It seems to be a very self-centered thing, too. In one point, there’s the lack of critical thinking when you try to talk about the economy, and base of the fundamental idea that someone has to pay for things, right? Things don’t just come out of the sky for free.”
When presented with facts, debate, and hard evidence, these loud groups tend to spiral into making accusations of ultimate hatred, of racism and other forms of prejudice rather than calmly discussing the issues.
The solution that Dr. Collum presents is that the adults need to step in. He recalls that college students in 1960s were just as angry as the students today, but the administrators stepped in and took control. Free speech was promoted, but it was not acceptable to shout a speaker down and interrupt an act of free speech. Cowardly administrators are a massive issue in these situations. He mentions that activists at Evergreen State College in Washington might have caused permanent damage due to lack of control. Even the left-wing professor Bret Weinstein completely disagreed with new “rules” that certain students wanted to enforce, barring white students from attending school on a specific day.
“Evergreen had a 98% admit rate…and I’m guessing that their admissions plummeted. A number of schools’ admissions plummeted, University of Missouri for example, and Evergreen, which was just barely hanging by its nails is probably below the solvency level.”
The Economy and Fraudulent Metrics
In answering Hartman’s question about what he sees in the current economy and real estate market trends, Dr. Collum states that in both economy and markets, there is talk about how good the economy is, and it usually comes from people that “have a horse in the race.” He cites an analysis he read recently, stating that,
“The growth in the economy from, I think it’s ’09 to the present was approximately the same as the growth in the economy from 1931 to 1939.”
He notes that the economic path of the two time periods was very different, as 1931 to 1939 had bigger swings, while our current economy has been at a constant, stable level of depression. The swings are missing from our economy, likely because the central bank interventions are keeping the lows from showing through.
The GDP from 2007 has shown 10% growth, while equity markets have grown roughly 100%.
“If you want to know why we’ve yet again grown a new bubble, all you have to do is notice that the equity markets are a factor of ten above the GDP in their growth rate…The valuation metrics to measure whether equities are overpriced are fraudulent.”
There are several evaluation metrics that Collum claims are decent. The price to GDP is one due to its inflation correction. Another is Tobin’s Q, a price to book value, and composites of Hussman. Each of these put the market at 50% over value. On the other hand, the Triple Q or Russel 2000 Index have their numbers in the 23-25 zone.
“The way they calculate it is they take all the PEs that are above 40 and they round them down to 40, and they take all the PEs that don’t exist because they’re negative numbers, they’re losses…they give them a PE of 40, too. So, all of a sudden, a 23 becomes a fabricated PE and when a guy named Steve Bregman calculated it by saying, ‘Let’s take the whole market gap and let’s take the whole earnings and losses and make one big pot-load of price earnings ratio.”
Investors are being lied to by the parent companies, so they believe that they’re buying at a reasonable price.
David is Looking At a 50-70% Reduction
Regarding his figures of the reduction, Dr. Collum states that,
“I’m looking at a 50% regression of the mean, since anyone who knows arithmetic knows that you have to spend statistically half of your time below the mean. We shouldn’t regress to it, we should regress through it. And that gets you to a 60-70% correction.”
Hartman responds by saying, “You know, I always say that Wallstreet is the modern version of organized crime. Just like the government manipulates the statistics for inflation, employment, everything else under the sun.”
What Would Happen If the Fed Raised Rates
Both Collum and Hartman agree that the Fed is terrified of the social structure, and it seems that it is in their best interest to prevent anything from happening in the economy at all. In the past, central banks were not afraid to inflict a recession on the market to set the economy on the right track and now they’re very aversive to the idea of recession, possibly out of fear that the pension system would become insolvent with correction.
If the Fed did decide to raise the rates to 4%, people would be in a state of panic. Pension funds would collapse and there would be collapse on the bond market and the stock market simultaneously. The situation, according to Collum, is no longer comparable to treating a patient in a hospital with therapy. It has become using the chest paddles to ensure this patient doesn’t flatline. He goes on to say that,
“The creation of the Fed and central banks who refuse to take short-term pain since ’87, I would say, and instead have created what could be a calamitous period somewhere in the future.”
Warren Buffett is a Massive Insider
“The question that’s really tough is, ‘how long can it just keep going?’” Hartman asks, “How long can they kick the can down the road? No one can ever tell when they jig’s going to be up, really.”
Collum notes a quote he very recently heard from Warren Buffett, stating that given the interest rates where they are, the market appears to be cheap. According to both Hartman and Collum, Buffett is not a very reliable source when it comes to seeking the truth, as he lies constantly. He wrote an article in 1999 about how to value markets and it contradicts what he says now. Though Collum can attest that Buffett is a brilliant investor, it is only because he is an insider. He works with inside information to achieve his means, and was a key piece of the recent bailout.
Dr. David Collum closes the podcast by inviting viewers to have a look at his website, and states that he can also be found at his faculty page at Cornell University’s website, or his Twitter account @DavidBCollum.