Uber, Airbnb, Bitcoin: All grab their fair share of financial news headlines these days and are a part of a new sharing economy that’s arising globally. These newer entries into the marketplace are taking formerly dormant, unused resources and putting them to work, and it’s tough to argue against such innovation.
But will these newer entries survive in the years ahead, or will big governments and central banks resist them to the point that they become mere, one-time fads in the future?
It’s a clash that will be interesting to watch for you, as an investor, in the years ahead, say real estate investing expert Jason Hartman and a colleague in his Platinum Properties Investors Network, Andrew Baker. The best way for you to survive the fight, they say, is to stick to investments in real estate rental property, which they call “the most historically proven asset class in the world.”
The Platinum Properties duo discuss the sharing economy and other current issues in the most recent episode of Hartman’s “Creating Wealth” podcast.
Also during the podcast show, they: Play a clip from Mark Steyn’s book, “After America: Get Ready for Armageddon,” which leads to a discussion on European versus American lifestyles; agree that the United States is a land of abundance and that you as an investor should appreciate such a style of living; and, explain why geography is less important than it ever has been in U.S. history.
The Sharing Economy, and Why Governments and Banks Will Resist It
One of the sharing economy newsmakers, Bitcoin, is part of a “crypto currency” trend on which Hartman has commented in other recent podcasts.
If you’re a follower of Hartman, you already know that he espouses investments in real estate over what he calls the “scams” of Wall Street and trading in metals such as gold and silver—and he thinks Bitcoin could soon join that list of scams. He’s still deliberating on the concept and hasn’t owned any of the cyber currency yet.
Bitcoin did recently surge to a record high in value when its price was set at $3,169, shattering the previous high of the cyber currency’s value of $3,000 set back in June.
However, in his most recent podcast, Hartman continues to say that you as an investor should be wary of this newer form of currency.
“The whole crypto currency, alternative currency thing, as I’ve said before, and I would love to be nothing more than wrong about this … the governments and central banks around the world aren’t going to let it happen,” he says. “They’re going to find a way to control the money supply. That’s where they gain most of their power. This is the one last bastion they can control.”
He adds: History has shown “again and again” that investors should never bet against the Federal Reserve and that you should invest, instead, in “the most historically proven asset class, the single-family home.”
Governments, central banks and others often confuse Bitcoin with Blockchain, which is a part of the technology on which Bitcoin is built. They are two different things, Hartman notes, but “Blockchain is great” when compared to Bitcoin, because the United Nations or any central bank can create any currency that uses Blockchain technology.
“And that would be awesome for them,” he says. “But they still would control and manipulate it at some level, and that’s how they would still control, literally, ‘the wealth of nations’—to borrow a cliche from Adam Smith. That’s not a cliche, but a wonderful philosophy, and is a book you should read.”
Mark Steyn Clip: Has American Ingenuity Slipped Since the Moon Age?
Speaking of books to read, Hartman plays in the podcast a clip from a 2006 New York Times best-seller, “America Alone: The End of the World as We Know It,” by Mark Steyn, a Canadian author and political commentator. In a popular follow-up book, “After America: Get Ready for Armageddon” (2011), Steyn argues that the United States is on the same path toward decline and fall as the rest of the western world, because of its unsustainable national spending and borrowing.
Hartman in his recent podcast plays a clip from the latter book. In the clip, Steyn indicates that he shares the same philosophy as Bruce Charlton, professor of theoretical medicine at the University of Buckingham in England: That the United States reached the peak of its ingenuity when it put man on the moon in 1969, capped by Buzz Aldrin playing Frank Sinatra’s “Fly Me to the Moon” for the world to hear.
“Isn’t it kind of hard to imagine America pulling off a moon mission now?” Steyn asks, adding that America no longer even worries about going there. “The countdown, the takeoff, a camera transmitting real-time footage of a young American standing in a dusty crater beyond our planet, blasting out from his iPod Lady Gaga and the Black-Eyed Peas or whatever the 21st-century version of Sinatra and the Basie band is?”
Steyn writes that America since the 1970s has become a “self-esteemed booster-ism operation” overwhelmed by bureaucracy.
“If we try to build the transcontinental railroad now, they would be spending the first three decades doing the environmental impact study and hammering in the golden spike to celebrate the point at which the feasibility commission’s expansion up from the fifth floor meant the zoning board’s expansion down from the 12th floor.
“Google and Apple and the other latter-day success stories started in somebody’s garage—the one place where innovation isn’t buried by bureaucracy.”
Hartman stops the Steyn clip at that point and gets in his own dig, calling Google, Facebook and Airbnb “the political correctness thought police,” along with big news media outlets.
He notes that Airbnb recently has been accused of racial discrimination in renting, and adds, “shame on Airbnb.”
As for Google and Facebook: “Literally, the morning after we heard about the Trump election, I’d never heard the word ‘fake news’ before in my life, and suddenly ‘fake news’ was everywhere. That’s how Trump got elected, ‘fake news,’ right? But yet, these big news media outlets have been engaged in ‘fake news’ for at least three decades.
“I mean CNN has been caught red-handed—the Communist News Network, with their ‘fake news’ propaganda—so many times, that it’s pathetic.”
Appreciate the American Lifestyle Over the European
The Steyn book clip leads to Hartman and Andrew Baker, his Platinum Properties colleague, discussing the differences between European and American lifestyles.
Hartman, who recently returned from a trip to Europe, his birthplace, bemoaned what he called a European “attitude” he encountered while on the trip.
“It’s just shocking,” he says. “It’s like what the U.S. is becoming if we don’t fix this. Hopefully, the Trump administration will fix it. That remains to be seen. Trump sure has had his share of problems and issues. No one would deny that, not even a supporter of his.”
Hartman says his experience in Europe was “it’s like every obstacle is thrown in your path.”
“You just try to do a simple thing and the European response you hear all too often is, ‘Well, that’s not the procedure, that’s not our policy. At least in the States, you’ll have some creative thinking, someone will go out of their way to make the customer happy. It’s like bureaucracy is engrained in the (European) culture, and everybody seems to be look at the government as though it’s their uncle looking to protect them.”
Hartman looks at the government as “an imposition, something that gets in the way.”
“And, Mark Steyn was talking in the clip about how, in the old days, all of these new, great medical cures were invented, but now, with the FDA, it’s just become bureaucracy that’s corrupted by money and lobbyists and special interests, just like everything else.”
Baker, meanwhile, says he has noticed that Europeans generally seem to live a life of minimalism, one in which they seemingly go to the grocery store daily to get just what they need for that day and own perhaps five pieces of clothing that they wear “over and over.”
He remembers his first longer trip overseas, to the Caribbean where stores also are minimal in nature and carry just the basics, then coming back to the United States and a Wal-Mart where bright lights seemed overwhelming. “It made you think of all of the abundance going on here and seeing the contrast,” Baker says.
Hartman understands how Europeans can see Americans as gluttonous, but adds, “Let’s have the choice.”
“Let’s have our economy, our culture and our legal system give us the freedom of that choice,” he says. “We may well become our own worst enemy and not be able to control ourselves— the kid-in-a-candy-store metaphor—but that’s what freedom is all about. With freedom comes responsibility, and that responsibility is self-control.”
Geography Becoming Less Important to You as an Investor
The three primary drivers of real estate have always been “location, location, location.” But, Hartman notes, “Location and geography are becoming less meaningful than they’re ever been in human history.
“I’m not saying they’re not meaningful, but I’m saying they just have less meaning than they’ve had before, through technology, communications technology, then transportation technology, especially the autonomous vehicle.”
Baker says he foresees the day when retired couples and maybe even younger millennials lead a nomadic lifestyle, because it will be too expensive for them to live in one place. They will instead own a self-driven or autonomous vehicle, go from place to place and commanding the vehicle to travel at night, and getting by just fine with their own mobile services such as phone and internet.
Their main intent will be escaping taxation and regulatory fees.
“Their lifestyle will be enriched because they’re not going to be in the same place at the same time every day,” Baker says. “They may have to get a PO box in Las Vegas and have that be their primary residence.”
Hartman says “the tax nexus” is at play with such a scenario. “The tax nexus is always based on geography,” he says, but now the geography has become different.
“In the old days,” he explains, “if you were a business owner, you probably owned a physical business. It was either a store or a factory or somewhere that was clearly defined as to where that was located and what jurisdiction got the privilege of oppressing—er, taxing—you. Now, that has become fuzzy.”
Someone now could try to buck the system of taxes and fees by traveling the world with a laptop and base their business—say, such as producing a podcast—from the road, he adds.
“The power has swung away from the governments and it has swayed toward the people, and that’s the way it should be,” Hartman says. “It is much harder for the government to figure out how to tax people nowadays. They’re trying to keep up with it, but the law and government are always behind the trends.
“So, we’ll have to see how that unfolds.”
Also, in terms of geography, Hartman also predicts that people will eventually tire of the hassles of living in a big city like New York with its high expenses and move to smaller markets instead.
Such places would include, of course, areas where Hartman and the Platinum Properties Investors Network like to locate. They particularly like rental properties that are located in linear markets, rather than cyclical markets. Linear markets tend to be toward the middle of the country and away from the coasts.
Real estate prices in linear markets stay steady over a period of years, while cyclical markets are those that can fluctuate widely up and down in price. Hartman and Platinum say that cyclical markets leave investors too susceptible to heavy losses when there are sharp market downturns—as occurred in the real estate fallout of 2007 and the financial crisis of 2008.
Says Hartman: “I think priorities are moving away from places like (New York or San Francisco) to the second-tier, even third-tier type places that just make a lot more sense, where life is easier, where you can still communicate and have all the benefits of those places.”
That could well be a trend and economy in which you as an investor would want to share.