In this episode, Jason Hartman interviews Ric Edelman, CEO and Chairman of Edelman Financial Services and author of The Truth About Money and Rescue Your Money. They talk about Behavioral Finance, inflation, taxes, 16 major asset classes and market sectors, and the two things people believe about the stock market which is completely false. He also gives his advice to those interested in investing in their financial future: diversifying your portfolio and never paying off your long-term mortgage.
Announcer 0:00
This show is produced by the Hartman media company. For more information and links to all our great podcasts, visit Hartman media.com.
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Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it on now. here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:03
Welcome to the creating wealth show, episode number 701 701. This is your host, Jason Hartman. Thank you so much to so many of you listeners that have stuck with the show for a decade, for 10 years. Can you believe it? It’s been I don’t know the exact date we started but it’s been about 10 years give or take. Episode 700 was a big milestone for us. That was published last Friday. So it’s, it’s just great to get there. And I can’t wait till we get to Episode 3700 or 4700. And we will definitely do that together as we continue to explore the world of personal finance, real estate investing the most historically proven asset class in the entire world. Other interesting things, from politics to self improvement to whatever Ever to whatever, lots of good stuff today we’ve got Rick Adelman on the show. And you’ve probably heard his name. He’s the author of many best selling books. His latest is called a rescue your money retirement plans and IRAs, build savings and select the right investments, retirement income, and the truth about money. Another one of his really big books. He’s great. He’s been on the show before. So he’s a returning guest. Rick, of course, is a stock guy. I know most of you are interested in investing in income property. But he’s got some good perspectives on some things. As you know, he came out years ago with that fantastic, and you can find it on YouTube 10 great reasons to carry a big long mortgage and never pay it off. That, of course, speaks to my heart directly. And that’s where I got interested in Edelman’s content. So we’ll have him here in a moment. But first a couple of things. We’ve got our event coming up in September, in the Greater Phoenix metro area. That is not yet on the Jason Hartman comm website. But it will be up really soon, we did announce that so many of you are asking. So this is where we will teach you how to use software to really help run your business. And we’re going to go through some sort of fundamental things about dealing with property managers and the buying process and so forth. And then we’re going to have three or four of our local market specialists there and this will be a full weekend event both Saturday and Sunday. So don’t miss this. This is a totally new type of event for us. And I think you’ll really, really enjoy it. Well, we look forward to seeing you there in September in Phoenix. So look for that at Jason hartman.com really soon, and we shall go from there. Now. I want to share with you before I get to one of our listener comments. Just a quick little thing I saw, you know one of the features. I love that Facebook As implemented, I don’t know what it’s been a year and a half now maybe they’ve been doing Facebook memories. It really becomes kind of a diary for your life and like flashback Friday on our show reminds us of, you know, what was the outlook back then? What were we thinking back then? What was I thinking back then? Was I right? Was I wrong? One of the posts that I made a couple of years ago was a little chart about inflation. It’s pretty interesting because it summarizes a bunch of items. And I’m going to do what the government does. I’m going to strip out energy. They also strip out food, I’m not going to strip out food, but oil has been particularly volatile. So I’m going to leave that one out. But I’m going to share with you just a couple of others. We won’t talk about gas prices and so forth because they have truly been all over the board. Of course, you regular listeners know what I’m getting to here. I’m talking about how they strip it out of the core information. rate, they call it core rate or core inflation and do that but these other things are pretty valid annual health care spending per capita in the year in January 2000. Okay 40 $550 in March 2014 90 $300. Now I can tell you, since the wonderful socialized healthcare system that we are moving towards galloping towards, if you will, Howard ruff was on the show, and he said, We are galloping towards socialism. And I would agree with that in many ways, since that went into effect known as Obamacare, right, since that went into effect, I can tell you personally that here at my company, health care costs have skyrocketed by about 35%. Yes, if you want to make something expensive, just make it free.
If you want to make something expensive, make Free in one way or another, it will become expensive. So the increase in healthcare cost has been 104.4% 104.4% ground beef, January 2000 $1 90, March 2014 $3 and 73 cents 96.3% increase. Now through hedonic and substitution, they will manipulate the index to not just with the core rate concept. And so they’ll say, Well, if the price of beef goes up, everybody will just switch to chicken. But maybe you don’t like chicken because chickens a dirty bird. Okay, movie ticket, January $2,005, and 25 cents, March 2014 $10, and 25 cents, a 95.2% increase. And I will tell you, it’s actually a lot worse than that folks, because I went to the I pick movie here in Scottsdale, a couple of years. weeks ago, a few weeks ago, I guess before I went to Fiji, it was $26 I think I couldn’t believe it. Now granted, that’s one of these luxury movie theaters where they’ll come and sell you food and drink and charge a lot more than that. So going to the movies could literally be $100 affair. Okay. But yeah, I couldn’t believe that it was mind boggling. Average private college tuition cost January 2020 $2,000. March 2014 $37,000. That is a 68.2% increase electricity per kilowatt hour 2000. I’ll just you know, the year and the time I’m talking about the same time frame for everything. eight cents per kilowatt hour now 13 cents per kilowatt hour in 2014. That’s a 59.5% increase a new car $20,300 to $31,500 a 55.2% increase coffee per pound, $3 and 40 cents versus $5 and 20 cents a 52.9% increase. And, you know, it goes on and on. So you ask, what about the two opposing forces that I’m always talking about? They are central banks and governments versus who’s on the other side and who will win versus technology, technology being deflationary and improving the standard of living, and central bankers and governments being inflationary and destroying the standard of living? That’s what they do. So the question is in this epic battle, this is the big question in the epic battle, Who will win? What force will be more powerful? And the answer is, I don’t know.
None of us know. And you know what, not even the inside Know, the biggest tech guru and futurist guru in the world, Alvin Toffler, he just passed away. Peter Diamandis, he’s out there and I’m gonna share with you something from him in a moment. All these people they don’t know. And guess what, Janet Yellen is the world’s most powerful central bank, the Federal Reserve, the US Central Bank, she doesn’t know. And the people running the ECB, the European Central Bank, they don’t know. Nobody knows. Okay, nobody knows. We can only guess and we can only watch it play out. These things are so complicated. It is literally insane. Economics was they say they call it the dismal science that was created to make astrology look credible. So there you go. By the way, some of that astrology stuff does seem pretty credible. I mean, it’s kind of amazing to me how sometimes people they’re kind of like their sign. Have you noticed that? Okay. I digress here, so I’m not going to do that. All right, so let’s get to a comment. Well, not a comment from a listener, but a listener who wrote me on voxer. And this is from Ricardo, thank you for sending this in. I am going to just play here, my response, which may sound a little frustrated, because people are always asking me this question that I don’t know the answer. When you don’t know the answer, you get kind of flustered sometimes, right? I really don’t. And it’s going to be interesting to watch this play out. So you’ve all heard and we’ve talked about on the show about 3d printed houses, right? And what drives me crazy is that as great as 3d printing as is as much of a revolution as it will probably be, it is not free. So we have to see how this will all play out. So here is my reply. Pardon the audio quality. You know, we have a very sophisticated studio here, which consists of Jason In his office here at his adjustable height desk standing up, because it’s much more healthy, holding his iPhone to the microphone to play you this message. How do you like that? Now I know, other podcasters may have better production, but nobody has better content, do they? Yeah. I saw that. And there we go. And it’s certainly possible. But compared to what, that’s always the question, I mean, and here’s a huge myth about these people in this 3d printing stuff. I mean, it really drives me nuts. But it cured it. 3d printing is not frickin free. It’s not friggin free, because it’s 3d printed doesn’t mean it’s free. I don’t know where people get this idea. It takes energy to run the 3d printing equipment, especially if you wanna build a house. It takes materials lots and lots of materials in that additive manufacturing process. tons of material. Material doesn’t come from nowhere. It’s not created out of thin air. Like money, and, you know, it’s just not free. But look, technology is deflationary. There’s no question about it. It’s deflationary with everything, every single thing in the world is impacted by it except healthcare, the legal system, the cost to become an investor and get into the investor class and college education, because those things all have separate scammy elements to them that manipulate the markets and just don’t make any sense. Okay, so, you know, but in a logical world, those things would all become deflationary to they are just not because of various monopolies and so forth. And anyway, compared to what, that’s my question, I mean, what else are we going to do? You know, and here’s the other thing I want you to understand is that when I see all this stuff on my Facebook feed, and so forth about all this great stuff, that’s, you know, right around the corner, the 3d printing the, you know, these cool gadgets and houses. I keep asking myself, where is that stuff? I don’t know anyone who has that. I don’t know anyone who lives like that. You know, it’s just I don’t know. I just don’t know where it is. So yes, it will eventually come, I’m sure. But we shall see. I don’t know. I don’t have an answer. You know, we overall just gonna sit here and witness it together. And, you know, we shall see. But here’s the other thing to remember. Even with all of these deflationary forces, as I’ve said many times on the podcast, it is a balance between what will win will it be deflationary force of technology or inflationary inflationary forces of central banking and government. And so we’ve never been in this territory ever before. We’ve never had 220 trillion dollars in unfunded entitlements coming at us. We’ve never had this much debt. And not just in the US, but in the entire world. We’ve never had a derivative derivatives a bubble like this. We’ve never had any of this stuff. It’s totally uncharted territory. So well, technology made the monetize a lot of these things, as Peter says, and he’s he’s right about that. I just don’t know how long it will take the thing he is not talking about, as the opposed is the opposing force of central bankers and governments, which is which they can inflate, regardless of how cheap technology wants to make something. If they print enough money and the human nature have never been contempt exist, that money will find its way into the marketplace and it will buy things. And that causes inflation. So which force will win? I don’t know. We’ll see. Thanks for the comment.
All right. So one of the interesting things about this epic battle between the deflationary and inflationary forces and which force will be more powerful which force will win is that the ability of central bankers to print more money is unlimited and the ability of governments to create more debt because of their interest in buying votes and keeping the incumbency in office is unlimited. That is unlimited, right? But technology does have limits through time. at each point in time, technology will be limited to whatever it’s limited to. It will ultimately advance beyond that point. But you know, it’s just an interesting topic. Can the government screw things up faster than technology can make them better? I guess that’s really the question we’re facing. And we shall see how it all works out. It’s interesting stuff for sure. So Ricardo, thank you for the comment. Appreciate that. And keep them coming, folks. Keep them coming on. voxer J. Hart. 88. I love how a lot of you have connected with me there. Go to Jason Hartman comm check out our properties, their inventory is very limited. If you are looking to get into the market or increase the size of your portfolio. Boy get out there quick because that is the problem. In fact, I’m going to share with you maybe the next episode are very interesting study about the new new housing crisis. And guess what the new housing crisis is? Lack of inventory. Yeah, a whole big article. I read about this recently. And I don’t have to read an article about it because I experienced it every day in my business. So we shall see And remember, under all his land, so even if you can build those houses for free with a 3d printer, which you can’t and never will be able to, it’s still got to sit on some land somewhere. So it’s interesting stuff. Okay, let’s get to our guests. Rick Adelman.
It’s my pleasure to welcome Rick Adelman back to the show. You’ve certainly heard his name you’ve probably listened to his radio show. He is chairman and CEO of Edelman financial services, host of the truth about money with Rick Adelman television show and the Ric Edelman radio show. He’s author of the number one New York Times bestseller the truth about money and his most recent book, rescue your money. How to invest your money during these tumultuous times. I became interested in his work many years ago, when he came out with a DVD, entitled 10 great reasons to carry a big, long mortgage and never pay it off his philosophy very much in alignment with mine, and it’s a pleasure to have him back on the show. Rick, welcome. How are you doing?
Ric Edelman 17:22
Terrific, Jason, thanks for having me.
Jason Hartman 17:24
It’s good to have you. Where are you located?
Ric Edelman 17:26
In Fairfax, Virginia.
Jason Hartman 17:28
Fantastic. I would like to give our listeners a sense of geography in our virtual world today. So you added another reason to the 10 great reasons to carry a big long mortgage and never pay it off. Do you want to just talk about that topic for just a moment before we dive into your new book? Sure.
Ric Edelman 17:44
It makes a lot of sense because our homes and the mortgages we have with them represent a big part of our personal finances. And if you miss manage your mortgage, then you are going to create additional challenges in your efforts to achieve financial security in the future. A lot of people think that financial security equals owning your home outright without a mortgage. And there’s a big movement in America, it’s been going on for 100 years of owning your home outright getting rid of the mortgage, they consider it the American dream that made sense in the 1930s. doesn’t make any sense today in the 21st century. In fact, a mortgage is one of the most effective tools available to you to help you create wealth. And so in my book, the truth about money, which you mentioned earlier, Jason, in the truth about money, I offer 11. Now great reasons to carry a big, long mortgage. I’ve constantly add to this list. When I first came up with it, there were only five now there are 11 I keep finding more and more reasons to carry a big long mortgage and my new number 11th reason is because no matter what you do, no matter how hard you work, no matter how much effort you engage, you’re never going to get rid of your monthly payment ever. And that’s because of PII. Everybody thinks paying off the mortgage means they don’t have any payments anymore, but now that just gets rid of the P in the eye, the principal and interest, you’re still gonna have the TI taxes and insurance. As long as you own that home, you’re gonna owe that money. So there’s no such thing as owning your home outright.
Jason Hartman 19:11
I couldn’t agree more, you know, pretty much anywhere on planet Earth. There are a few exceptions, actually. And I did a show on that a long time ago. You have a perpetual lien on your property called property taxes almost everywhere on the planet Earth. And not only Rick, do you have the Tni which you so wisely mentioned the taxes and insurance, but you probably have an HOA as well as many times homeowners association, which is another perpetual lien on the property. So you never own it free and clear. And I just remember many years ago, one of the CPA speakers who was on the circuit you probably even know this guy Danny Santucci, a funny CPA I like to find out what that guy’s up to get him on my show. But But he used to say you know own control everything. And in, of course, you own the property, you know, in, technically speaking, but the bank has a lien on it. But the point is to control a lot of stuff. It’s not to necessarily pay it off because you can’t pay it off. You know,
Ric Edelman 20:17
And most people forget the implication of paying it off that if you’re going to pay off $100,000 mortgage, well, where’d you get the hundred thousand dollars to pay it off with you had to withdraw that money from your other savings and investments.
Jason Hartman 20:28
And then last you have an opportunity cost? Yeah, you have an opportunity cost on that money you could be using somewhere else. Right.
Ric Edelman 20:35
So let me let me phrase it to you this way. It’s my favorites. Jason. As you know, you’ve you’ve you’ve just borrowed money from a guy in the back alley, and he says, I’m going to give you a choice. You can either give me 600 bucks a month, or you can give me 100 grand right now. Why on earth would you write the guy check for 100 grand today? Well, he’s asking for $600
Jason Hartman 20:56
Depends on how big his gun is but yeah,
Ric Edelman 20:59
We have to record eyes that mortgages are terrific tools because it allows you to use the bank’s money instead of your own, that house is going to grow in value or not, whether there’s a mortgage on it or not, so that the paying off the mortgage doesn’t allow the investment to grow faster. You’re just tying up money in the walls of the house, you’d never tie up money under the mattress, why buried in the walls? So those are just a few of the reasons we love the idea of a big, long mortgage.
Jason Hartman 21:24
It’s so funny, Rick, how people’s psychology just gets all muddy and murky and well, you know, even wealthy people that are sophisticated, quote, unquote, they’re just kind of like, Well, you know, I just want to have my home free and clear, then they can’t give you a logical reason really
Ric Edelman 21:42
emotional about it. And and we recognize that that’s why behavioral finance is such an important element of the work that we do. I’ve written a lot. In one of my other books, I wrote a lot about behavioral finance and why emotionally we tend to make the wrong decision at the wrong time. And it’s important that we understand this Fact, because if we allow our emotions to dictate our financial decisions, we’re going to make our future financial security much less secure, it’s going to be much more dicey. And so this is what we are facing with all the time as financial planners, helping our clients avoid fundamental mistakes, so that they’re doing what they really need to be doing to improve their, their family’s lives.
Jason Hartman 22:21
Yeah, you’re absolutely right. You know, I really enjoy listening to your radio show, as much as I happen to be in the car and hear it. And, you know, you you make some really good predictions on the economy. I remember during the financial crisis, he told everybody, don’t look at your statements, and you turned out to be right, you know, just in and that’s kind of that behavioral finance issue. One of the things I’d like to ask you as it relates to this mortgage thing, and then let’s get into your new book, rescue your money, is, what does Rick Adelman think about inflation in terms of the official rate that the government tells us versus the real rate of inflation? You You think there’s a disparity there? And do you have any thoughts or predictions on the future of inflation, deflation stagnation, whatever we might be facing?
Ric Edelman 23:09
Well, the official inflation number right now is very, very low under well under 1%. Now, we can argue as to the validity of that calculation by the federal government, and I am in the camp who believes that they cheat when they create the number four, and they do it for political reasons, but it doesn’t agree to agree. But it doesn’t matter whether we agree or disagree with a number. And here’s why. Two reasons. Number one, they’re consistent in how they report it. So we might argue in their calculation, but the calculation is consistent, which allows us to effectively compare today’s reported number to that of a year ago and 10 years ago, and so on. And on that basis, inflation is much lower today than it was five and 10 and 20 years ago. Having said that, we go to point number two, your personal inflation might be much higher than the government’s reported inflation. If you are sending children to college, you are experiencing a far higher cost of education than five or 10 years ago, college costs have been growing at four times the rate of the average overall inflation rate, medical costs skyrocketing. So if you’re all you’re doing is buying gasoline at the pump, well, yeah, you’re seeing a dramatic reduction in cost for gas compared to a year ago. Same thing for buying computers and iPhones. They’re cheaper today than they were a year ago. But drugs are more expensive. Education is more expensive housing is more expensive. So depending on how you spend your money, what’s going on in your life, you may be experiencing a very high rate of inflation.
Jason Hartman 24:42
And one more point to kind of add on to that you did mention housing, but you teach people about investing and I teach people about investing. And I would argue that inflation has massively impacted one’s ability to enter what I call the invest class, right? There are there are the non investors who are just getting beat up like crazy in the world, unfortunately. And there’s the investor class and this is one of the reasons the rich get richer most of the time in to get to enter the investor class, if you will. There’s been massive asset inflation. And you know, most people just call that a bull market, whether it be real estate or stocks or whatever. But would you agree that that’s a that’s a unmeasured part of inflation?
Ric Edelman 25:28
Yes, I think you’re right. And it’s important he didn’t mention the rich get richer, and it’s true. Part of the reason though the rich get richer, is because they participate in behaviors that help them get rich in the first place. They lived below their means. They were careful to save money on a regular basis, no matter what was going on in their life. They didn’t allow any excuses to get in their way. And they emphasized growth oriented investments, real estate stocks, mutual funds, the kinds of assets that can grow in an inflationary environment as opposed to putting in money in a bank account where it earns these days zero point nothing, a rate of return that is not going to keep up with the rate of inflation. In fact, you just cited one of the two key obstacles that investors face and I talk about these in my book rescue your money. Number one is inflation. The other one is taxes. Because you don’t get to earn keep everything you earn. The government is going to take as much as 40% of that money between federal and state taxes. So we have to recognize that taxes and inflation are huge obstacles that we must overcome. And in bank accounts, you have the worst of both worlds the highest tax rate and underperforming relative to inflation. Real Estate helps you overcome that so does the stock market. And so my book rescue your money is designed to teach people how to understand the environment we’re in, especially in today’s tumultuous environment between the federal election and what’s happening with Brexit. The horrific horrible shooting that just occurred in Dallas and Natural disasters. I mean, these are crazy terrible times, in a lot of ways. And yet despite all of that, we have to continue working toward our own future financial security and the book, in a very quick read, you can read the whole book and one sitting shows you how to face today’s realities, how to design a portfolio that will get you where you’re trying to go.
Jason Hartman 27:22
And fantastic and one of the things you talked about is how people save and I think that’s one of the key elements of what I call financial maturity is the willingness to delay gratification for something bigger in the future. So very important. Well, who did you really write rescue your money for?
Ric Edelman 27:41
It’s for people who are confused, anxious, a bit a little bit scared and maybe even somewhat angry at the situation they find themselves in this goes all the way back to 2008. People were shocked back then and how not only how much money they lost, but how fast they lost it and a lot of folks in a panic sold while assets were down a lot in value. And they’ve sat in bank accounts ever since the past six, seven years. And they’re still living today, the crisis of 2008 because their assets today are the same value as they were back then even though the stock market is tripled in value, even a real estate prices have recovered in almost every market in the country. They’re still frozen in time because they sold in a panic back in oh eight. And so this book is designed to show you how you can rescue your money. That’s why I gave it that title of the book. To help you understand there is a way that you can participate in the opportunities that the financial world offers. It doesn’t take a huge amount of risk. It doesn’t take a huge amount of money. It doesn’t even take a huge amount of effort on your part. You just have to know how to do this. And it’s not complicated. It’s not confusing. It’s easy to do. Anyone can do it. And that’s what I wrote my book for.
Jason Hartman 28:55
Yeah, good stuff. Well share with us. Maybe you don’t just any Any specific tips there are the mechanics of doing that?
Ric Edelman 29:04
Well, I’m a really big fan of diversification on one simple reason. Nobody knows what the future holds. And every time you turn on these cable TV networks devoted a month may hear you pick up a financial magazine, they’re filled with hot tips of what’s going to happen next. And nobody ever gets it right. And nobody is ever held accountable for the predictions that they make today. So our
Jason Hartman 29:28
I know, it’s ridiculous, obscene, really.
Ric Edelman 29:29
I’ve been doing this for 30 years, my firm manages over $16 billion in client assets. We work with 30,000 clients all over the United States Coast to Coast. We have 42 offices around the US. And we’ve learned through our 30 years of experience, nobody knows what’s going to happen next. And therefore trying to predict and say I’m going to invest in stocks, not bonds, or I’m going to invest in bonds, not gold or only invest in gold, not real estate or real estate, not oil. That’s a crapshoot everybody He’s making this stuff up. So our attitude is instead, do it all. That’s what true diversification is. It’s based on modern portfolio theory, one of the most robust, academically proven strategies available. And it simply says there are 16 major asset classes and market sectors, you should own a little bit of all of them. So you should absolutely own real estate in your portfolio. You simply shouldn’t have a portfolio that’s only real estate, just like it shouldn’t be only stocks and bonds. It’s okay to eat green beans, but no dietician would tell you to eat only green beans. You want to have a balanced diet health wise, you want to have a balanced portfolio wealth wise, it’s that simple.
Jason Hartman 30:37
Some of those 16 areas Can you can you share a few of those for us?
Ric Edelman 30:40
Sure. We’ve got the world of stocks. Inside of stocks, you have US stocks and foreign stocks, you have growth stocks and value stocks. You have small companies, mid sized companies and big companies. Then you got bonds, us and government, corporate and government you’ve got us and foreign you have short term intermediate long term. high quality bonds, you have junk bonds. You’ve got real estate which is, as you all know Jason diversified by geography by type of property, whether it’s a home, apartment building, retail, commercial, agricultural, raw land, forestry. You have oil and gas, natural resources, precious metals, commodities, you have this wide array of asset classes, and thanks to exchange traded funds and mutual funds, you can invest in a wide variety of these asset classes with extraordinarily small amounts of money and, and extraordinarily low cost in my firm, our household minimum is only $5,000. Most advisors require you to have a million dollars or even more to become a client. And we have a lot of clients who are millionaires in our practice, but we also have an awful lot of clients who are just starting out in life. They don’t have a whole lot of money, we’re able to help them just as well. It doesn’t take a whole lot of money to Do this and the investment costs look the cost of the ETFs that you might buy. They’re incredibly inexpensive today, thanks to technology. So there’s really no excuse anymore for people not to participate.
Jason Hartman 32:11
Yeah, yeah. Any thoughts on on market timing? And you know, what’s going on? So many people are saying, oh, the real estate market, I certainly agree with it, by the way, in the frothy areas, whether they be the you know, all those cyclical markets, California, South Florida, the expensive Northeastern markets, where you are, those are very frothy, I think very risky right now, but people are also saying that about stocks, you know, do you think we’re at an inflection point or are you of the mind get in dollar cost average? You can’t time the market. Just any thoughts on that? Because everyone wants the hot timing tip, don’t they? They want the the great story.
Ric Edelman 32:51
And nobody ever gets rich, following those tips, which is why it’s nonsense to even try. Our attitude is that if you’re saying Gee, our stocks Priced too high. The Dow Jones industrial average is around 18,000. Right now. Is that too high? Well, let’s put it in proper context. What’s your time perspective? What? Which? How long do you have if we’re looking at a period of time and that’s my dog barking in the background? That’s okay. I’ve got one too. If you have a 20 year time horizon, stocks today with a dow at 18,000 is incredibly dirt cheap. 20 years from now I’m convinced the Dow is going to be 150,000. It might be only only put in quotes 100,000. So based on that perspective, if for the future in 20 years, the Dow is 100,018 thousand, how can you be worried the prices are too high? So what if it drops to 15,000 on its way to 100,000. So if we have the proper long term perspective, it’s going to matter Sure, real estate might be frothy in a certain a few markets right now, but compared to what compared to 30 years ago, or compared to 30 years from now. So if we have a look Long term perspective, we don’t have to worry about timing the market in the short term. Mm hmm.
Jason Hartman 34:05
Yeah, absolutely. In your book, you talk about two basic, you know, quote, truths, unquote. Do you want to address any of that or just want to make sure we we get any other information about the book out there? And then I want to just ask you about the Brexit for a moment before you go. Sure.
Ric Edelman 34:22
Yeah, it’s really interesting that there are two things that people rely on about the stock market that are completely false. One of them is that they think stock prices rise and fall completely false. And they also explain that. And also the stock market is risky and volatile and unpredictable. That’s completely false, too. And both of these are really important to understand, because if you think that stock prices rise and fall, you’re gonna have a totally misunderstood misconception about how the stock market really works. Here’s the truth. It’s not the prices rise and fall. The truth is, and my book rescue your money explains this with a couple of really nifty charts. The truth is that stock prices rise a lot, but only follow a little In other words, it isn’t up one down one up one down one, they don’t rise and fall. Instead, they go up five, down two, up seven, down three, up nine, down six, they go up for a much longer period of time and a much higher level, then when they go down, they only go down for a short period, and not very much at all. So if you compare the worst of the bear markets, to the best of the bull markets, you discover that the bear markets don’t happen very often, they don’t last very long and they don’t go down very much compared to bull markets, which happened a lot occur for a really long period of time and have massive increases. And that’s why people are willing to invest in stocks because it’s not an up one down one. It’s an up three down one. And because of that you’re able to make profits over very long periods.
Jason Hartman 35:48
Okay, and so so it sounds like the action tip of what to do with that knowledge is just be in the market is probably what you’re gonna say, right?
Ric Edelman 35:56
It’s exactly right. Just invest today. Stay invested, no matter what
Jason Hartman 36:00
People I remember Rick got really upset with companies like Merrill Lynch, who seems to be at the center of so, so much criminal activity. But that’s another discussion during the financial crisis, especially because they would not put their clients in cash. They just wanted to keep them invested. And I think that’s abusive, you know, that the the brokers just don’t make the money when they’re in cash. Right. They want to keep them in.
Ric Edelman 36:25
Yeah. And the problem is, what is the motivation of the advisor you’re dealing with? Is there a conflict of interest? And this is all too common and issue the Department of Labor just released new regulations that take effect next year, that will require brokers for the very first time to act as a fiduciary to meaning serve the clients best interest and everybody
Jason Hartman 36:48
thought that’s the way it was all this time, by the way, exactly
Ric Edelman 36:52
What I was shocked to hear though, so what do you mean by broker doesn’t have to do like like this is new. Not only is it new The new rule by the Department of Labor will only apply to your IRA and your 401k. It won’t apply to your brokerage account, it won’t apply to your joint account or your taxable account or your college savings account. So even the new rule is limited in the brokers obligation. So that’s the first question you need to ask your advisor. Are you a fiduciary? Are you legally required to serve my best interest? Most brokers would say no, I’m not required. Most brokerage firms say no, that’s not how we do business. So you want to hire a registered investment advisor and ri a, only a registered investment advisor like the advisors in my firm, only people like us are legally required to serve our clients best interest to get away the kind of nonsense you’re describing.
Jason Hartman 37:42
Yeah, yeah. And really interesting. It’s it’s amazing that it wasn’t that way all along, but it really wasn’t. Hey, Rick, before you go, I just want to ask you about current events a little bit. any predictions you have, of course, predictions are tough. I know. Maybe the impact of the Brexit. That’s huge news. Obviously, I was all in favor that I think there certainly might be some short term pain. But just philosophically, I’m not a fan of this big one world government stuff on account of bureaucracies, like the EU. But that’s, that’s my personal feeling about it. But you know, what are what are your thoughts as to the impact?
Ric Edelman 38:16
Well, as you said, Jason, we’re not terribly sure exactly what the results are going to be in the long run, that’ll be fine. But there’s likely going to be short term pain, mostly for the Brits, to some degree for the Europeans. And for a very, very tiny piece for the Americans. We do a certain amount of exports to Great Britain, but it represents about three tenths of 1% of our total GDP. Which means if Great Britain were to suddenly sink and no longer exist as an island, and it was just gone, and we stopped shipping anything to them. Our GDP would go from 100% to 99.7. Not a big deal, not a big deal. So this is and it’s not an issue for us. It’s going to be a political issue on a social issue for the Brits. They’re gonna have to deal with it to some extent, Europe as well. But for us as an American investors, you can ignore the whole thing.
Jason Hartman 39:10
Yeah, man. Yeah, interesting perspective. You know, the news media just wants to make a big deal out of everything because their their goal is ratings and In short, yeah, yeah good stuff. Well Rick, give out your website and tell people where they can find out more about you.
Ric Edelman 39:25
Our website is rice, Delmon calm. That’s Ric Edelman spelled phonetically rice Delmon calm and you can get my book rescue your [email protected] booksellers everywhere. It’s being released on July 19.
Jason Hartman 39:39
Rick Adelman. Thanks for joining us again.
Ric Edelman 39:41
My pleasure. Thank you, Jason.
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