ANNOUNCER: 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 multi-millionaire 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 three hundred and forty-two, #342. Thank you so much for joining me today. And I am doing the intro portion of the show by myself, so you know, I used to always do them by myself. And lately I’ve kind of had a guest host fill in with me, have a little conversation. So we’ll see if it is shorter this time, with me doing it myself. I really only want to talk about one major topic in this intro portion, and I think you’re really going to like it, because in so many ways, we are living in an amazing time, so we’ll talk about that in a moment. But our guest today will be Clem Chambers, and if you take nothing else away from this interview about where we talk about the history of investment, and investment mistakes that people make throughout the years and the decades and the centuries—which is pretty interesting—you’ll love his accent. And he comes to us today from one of the most beautiful places in the world, where I would say the people are rather haughty. My last—I’ve been there a couple of times, and the last time I did not think they were very courteous to me. And that is Monaco. Yes, the principality in the south of France. And people always accuse the French of being haughty and snobby and so forth, and I really haven’t noticed it too much—I’ve been to France several times, I like France. But my last trip to Monaco—actually, that was just, maybe a couple of years after the invasion of Iraq, when everybody just hated America. And I don’t know, a lot of people still do. And they’re not all wrong. They do have their reasons. Although some of them are rather ridiculous. But my basic philosophy is that we ought to try to avoid foreign entanglements, as George Washington admonished us so many years ago, and that is to stay out of all of these silly wars. But as long as war’s profitable for the bankers, the central bankers and the military industrial complex, hey. Unfortunately it’s probably going to continue. But you know? That is a tangent, because that’s not what I wanted to talk to you about in the intro portion. So let’s get on with that. I was talking with my mother this morning as a tropical storm bears down on Alabama. As many of you may know, she’s been building—well, it’s built, I guess I can finally say. It never seems like it’s finished. But she’s been building her southern mansion in Gulf Shores, Alabama for several years, and one of the things she was talking to me about, is she was talking to me about this tenant she’s had in one of her properties for many years that’s always been great about paying their rent, and this month—it’s not the 5th of October, the day after my birthday. My birthday was yesterday. 10/4, isn’t that easy to remember? Another tangent, I know. But today, October 5th, is my dog’s birthday. Yes, Coco is 1 year old today. And I forgot! We did that contest, by the way—another tangent—at the last Meet the Masters event, where you guessed what Coco would weigh on her birthday! And that day is today! So, now I’ve got to pull out all of those guesses—I think we actually made a spreadsheet—and we’ve got to award the prize to the winner! I think that was a free ticket to the next Meet the Masters event, if I’m not mistaken. So today Coco is 1 year old (7 years in dog years). And I will tell you, you all guessed what she would weigh, because you all met her last January, and back then, I’m going to guess, at the time you met her at our last Meet the Masters event—we like to have a house dog. So right in the hotel, roaming around the room, Coco was roaming around. My new puppy at the time. And I’m going to guess she probably weighed about 12 pounds at that time. And people were starting to guess how much she would weigh, so we decided to hold a contest. Well, here it is. Here’s the big announcement. I almost forgot. Had I not mentioned that it’s October 5th and yesterday was my birthday and today was hers, I would have forgotten. Coco now weighs…unbelievably, 49 pounds. Yes, 49 pounds. When I got her she weighed 3,4 pounds in December. This is the trouble with dogs. They just grow up too darn fast. But anyway, happy birthday, Coco, and congratulations to whoever was closest in the guess. We will look that up, we will notify the winner, and give them their well-deserved prize. So, all of you that were at the last Meet the Masters even in January at the Hyatt Regency at Irvine, someone’s going to be the lucky winner there, okay? Coco weighs 49 pounds. And I know the guesses were all over the board, so we’ll look that up and figure that out here real quickly. But what I wanted to talk to you about—oh yeah. I was talking to my mom this morning, and she had this tenant—or she still has this tenant in one of her properties—that has always paid the rent early, she’s really just always loved this tenant. And suddenly, this month, it’s now—you know, the rent’s due on the 1st. Today is October 5th. She hasn’t received the rent! And she has the tenants for her self-managed properties—my mom’s a big do-it-yourselfer. We’ve talked about this on the show many times. She has self-managed properties 2,000 miles away from where she lives. And we’ve discussed how to do that successfully many, many times on prior episodes and on our members only conference call. Ah! Before I forget. Another little tangent here. I just had a great interview with Gerald Celente, you know, the trends forecaster guy. He’s very well known. Some of his predictions have been very accurate, and some have been fabulously wrong. But in either case, he’s always really interesting. And I had a great interview with him the other day, and that interview will be in the members section, which we call Jason Hartman University. So members, take advantage of that. If you’re not a member, join—it’s only 10 bucks a month, $120 a year. And you get some great discounts on events and products and so forth. So, check that Gerald Celente interview out. But anyway, back to mom. So she has this tenant, hasn’t heard from him, can’t reach him—she’s tried to call—and she doesn’t know what to do. So she’s going to serve the 3-day notice to pay or quit, and that costs $52 to have the process server go out and do that. And they’ll snoop around and you know, see what’s going on with the house. Of course she doesn’t live near the house. The house is 2,000 miles away from her house, about. Maybe 1,500. So, I started mentioning to her, you know, one of her clients hired people on Craigslist to take pictures of his properties every month and send them to him, and he pays like 20 bucks a month per property for this. And we did a show on that a while ago. And I started talking to her about this whole new economy that is forming. And folks, I gotta tell you something. A lot of times, on the Creating Wealth Show, we talk about some very negative topics. I mean, look. Our government is an abject mess right now. The government is shut down, which you may ask why I didn’t talk about that on the last episode. I don’t really care! I actually, in many ways, I think it’s kind of good that the government shuts down. It’s really ridiculous, it’s not even shut down in any real way, because about 80% of the federal government is still running, even though the republicans are trying to defund Obamacare, which, gosh, I hope they’re successful and that Obamacare’s going to be an epic disaster. And by the way, they have a Facebook page—like an official one that the government puts up—and it was riddled with comments the day the exchanges opened on October 1st, about how the prices were too high, it was cheaper with private insurance, the website’s not working—a million problems. Anyway, Obamacare will be a disaster, in my opinion. So, that’s another thing to be negative about. But, there are so many incredible things that could really save us from this impending doom, or this gloomy new world that is riddled with $17 trillion in debt, depending on who you talk to on this next number, $120 trillion—I mean, you can’t even visualize what a trillion dollars is. It’s an insane amount of money. In unfunded mandates and entitlements coming up over the next 20 years or so…and so we talk on the show about how to game the system, how to beat the system, and how to thrive in the midst of all of these problems. And how to invest for the inflation, which we believe is headed our way, and it’s going to ruin most people, btu the people who are following our plan are going to be enriched by it, and really prosper through these times that are coming. But, I gotta tell you, go back and listen to that episode I did with Steven Kotler, co-author along with Peter Diamandis, of the book Abundance: The Future Is Better Than You Think. Now, they talk about a lot of new technologies and things, but one of the things that’s not even really a new technology, which is an incredible thing that I was telling my mother about today with her properties. I was saying, you know mom, there’s a whole new economy that is developing right underneath your nose, and you probably don’t even know about it. And the reason this came up is because she was wondering why she didn’t get the rent from this very good tenant she’s had for many years, and hasn’t been able to reach the tenant. I don’t know, maybe the tenant’s in the hospital. Who knows what happened. Well, we’ll find out soon, probably, right? But I said, you can probably just get someone off of Craigslist to just go knock on the door for you, or just call a local property manager, even though your property’s self managed, and ask them to go check it out for you, and they’ll just do it for free to try and get your business, and convince you to turn the management over to them, or sell the property, right? Or, you know, just pay ‘em $50 to go knock on the door and see what’s going on over there. There’s so many options. But then I told her about this whole new economy, and I said, you know there’s this whole new economy going on, right? And there are these websites like TaskRabbit.com, and you can hire someone from TaskRabbit to go and look around the property for you, knock on the door, see what’s going on. And this is really—I think this is, this whole thing, some have called it the sharing economy; some have called it disintermediation; there are many ways to describe this what I’ll call new economy. Now, back in the dot com bubble that of course collapsed around 2000—that was 13 years ago—they talked all about the new economy. And this new world of instantaneous global frictionless e-commerce, which has revolutionized the world, obviously. And that’s just the internet, and companies—the huge ones like Amazon.com, down to the little solopreneur working out of their garage or their spare bedroom selling something online—it’s revolutionized the world in so many very positive ways, and the world will never be the same again. But, websites like Uber.com—have you heard of Uber, or have you heard of Lyft.com? These are companies that you’ve probably heard of them by now, but if you haven’t—and if you’re not using them, frankly, I think you’re missing out! I use Uber, and I absolutely love it. These companies are completely changing the ground transportation industry. They are in some markets, putting taxi companies out of business. This is what’s called a disruptive technology, folks. And the reason this came up with my mom is I was telling her about this website called Rawporter, and I interviewed them on one of my other shows called the Speaking of Wealth Show, where I talk about infopreneurship and professional speaking and all the things I do as a businessperson. I talk about them and interview all of the thought leaders in that industry on that show, and we just came upon our 100th episode, so I told her about Rawporter, and I had those people on the show—I discovered them in the blog world in New York about a year and a half ago. And Rawporter is basically a website, Rawporter, where you can hire a photographer or a videographer anywhere in the world, practically, to go out and take pictures for you, film something for you, for—I mean, almost nothing. It is so cheap to use. For like $25, you can have someone in, I don’t know. I’m not sure they cover this market, but I’m just going to throw it out there—in Kenya, to go out and get pictures of something for you. Or someone in Moscow can do it. I mean, this is just an amazing world in which we live. I’ll give you some of the other websites. Here’s a great story about real estate, by the way. You’ve maybe heard of Airbnb, like bed and breakfast. BNB. Airbnb.com, this company I believe is valued at about two and a half billion, with a b, dollars already, and basically, it was just the idea of someone who wanted to—how did that develop. God, I can’t remember the whole Airbnb story. I did know it. But it was someone who wanted to, I think do Couchsurfing—which by the way is a whole nother website. Or they wanted to offer Couchsurfing. You know what Couchsurfing is? Have you heard about this one? It’s hilarious. There is a website—just Google Couchsurfing—it might be Couchsurfing.com—where this guy traveled around the world and slept on peoples’ sofas for free, basically. Just, there’s all of this crazy stuff, and what the Internet has done, is it’s disintermediated and disrupted so many businesses. So, Uber and Lyft are disrupting the taxi and the limousine industry, but also they’re helping it in some ways. I remember when I was recently in Chicago, at a Maverick entrepreneur event. Maverick is the group run by Yanik Silver, I’m a member of that. And I had Yanik Silver on the show a while ago; he’s a very well known Internet entrepreneur. And he runs this group called Maverick, and I was at their thing in Chicago, and I remember I took a taxi, and I noticed that the taxi driver had one of those things that has the suction cup and holds your iPhone on your windshield, right, and they had their iPhone on the windshield with the Uber app open! And I thought—I asked the driver, I said, isn’t Uber your competition? And he says no, no. I use Uber too! I drive taxi, but when I don’t have a fare through the taxi company, I’ll just make myself available on Uber, and someone through their iPhone will summon me, and I’ll go pick them up, and I think Uber gets 20% of the money, and I get 80% of the money. The driver gets 80% of the money. There is literally no reason in today’s world for anybody to be truly unemployed anymore. The creativity is mind-boggling. Have you heard of a website called Fiverr? Spelled funny—Brittany at our office, who you’ve heard on the show, she does a lot of our marketing. A couple years ago she told me about this website, Fiverr.com, and on Fiverr, for five bucks—yeah, $5—you can hire people to do some of the most creative and interesting things that you have never thought of. Whether you want them to help you with your social media, or produce a video for you, or go take a picture of the Eiffel Tower and turn it into a postcard and mail it to you through snail mail—I mean, the ideas are literally endless. There are just, I don’t know. Tens of thousands of ideas on Fiverr.com. Go set up an account and spend a whopping $100 and buy 20 things for $5 each. It’s just darn intriguing. But back to Airbnb. So Airbnb—I think there are some interesting things that we as real estate investors might actually use this for. And let me tell you a story that I recently read by Caroline Moss from Business Insider. This was posted on Business Insider; it says, this guy made $50,000 renting out his apartment on Airbnb, so he bought a house. This is a mind-boggling story, okay? Now, Airbnb, if you don’t know about that website, what it is, is a website where if you have a extra room in your house that you’d like to rent, either for a night, or a week, or a month, or whatever—you can list it on Airbnb. If you have a yacht sitting in Newport Harbor—or any harbor on the planet, for that matter—you can list it on Airbnb, and someone will rent it out. They’re now in 192 countries around the world. If you have a whole house or a condo or an apartment that you’d like to rent out—maybe you’d like to essentially trade with someone. If you want to go travel the world for 3 months, or 6 months, and you want to rent your place out, you can rent it out. And you can rent other Airbnb places from other people. And I remember Brittany, who works for us and told me about Fiverr a couple of years ago—she’s used Airbnb on a couple of her trips, and I think we actually talked about that from her recent Europe trip. And you know, she loves it. She thinks it’s great, and has great experiences with it. Anyway, this guy has an apartment, and he rented it out, made $50,000, bought a house, okay? So, I’ll just review a little bit of the story. It says, a man who goes by the alias Jackson White, just bought a house. If you’re thinking so what, then wait for the kicker. He paid for it using only the money he earned by renting out his apartment on Airbnb—about $50,000. Airbnb is an alternative to hotels and hostels, letting you rent out your apartment—or anything, frankly. It just says your apartment, but anything—to out-of-town-ers, or finding a place to stay yourself when you travel. Recently we talked about that kind of money that you could make renting out your Manhattan apartment over Super Bowl weekend. Hint: quite a bit. But like anything else, it’s unexpected that someone could actually work the system so much that they’d save enough money to buy a house. Well, White, according to an interview with The Billfold—okay, I guess that’s another publication, never heard of it—was charging $200 a night and paying $1900 a month in rent staying with his girlfriend whenever he rented out his apartment. White now lives with his girlfriend permanently and keeps his San Francisco apartment to rent out on Airbnb, charging $250 a night. From doing this, he saved $50,000 and bought a house. And then in quotes, he’s talking, he says, “I bought the house as an investment property to rent out on Airbnb,” white told The Billfold. “All above the board, legally. I’ll make more per night for only a little bit more per monthly payment.” I don’t quite understand what he’s saying there. But you get the idea. Except it’s not throwing money away on rent—it’s actually building equity. Now, what this guy’s done, is he’s a new breed of real estate investor, right? He buys this place, and it’s a rental property, and he’s got a rental that he rented in San Francisco that’s probably a rent-controlled apartment, because when I read you a little more of this you’re going to get the hint there. But instead of renting it out to a conventional tenant, he’s renting it out on Airbnb. Now, say for example, we just got back from our Austin property tour. Say for example you bought a property in Austin, Texas. Well, Austin, Texas is a city that has a lot of events and festivals. South by Southwest, you know, they’ve got all these great things going on in Austin. Live music, Austin City Limits, otherwise known as ACL, and a bunch of other stuff. There’s always cool stuff going on in Austin. That’s one of the reasons people like it. So say you bought a property in Austin, and say it was vacant—it just happened to become vacant. You were a traditional investor, but it just happened to become vacant during the time that you had one of these things going on. Well, you don’t rent your place furnished, probably, although you could, to a traditional tenant. So, maybe you bought some cheap furniture at IKEA, some basic furniture, or rented some furniture from CORT Furniture Rental, or one of those types of companies. And you know, you furnished it for the two weeks on either side of this event, right? This big event. And you listed it on Airbnb, and you rented it to that type of renter for a short time. Then you have CORT Furniture Rental, or whatever the rental company is, come and pick up the furniture, the house is vacant, all this time. Your realtor can still be marketing the property, or your manager can still be marketing it for a long-term tenant, and look at all that extra money you’ve generated for yourself! New ways to think. This whole concept of the sharing economy is really amazing. Back to the article: he says, right now it’s legal to utilize Airbnb and profit from it in the way White has, at least in San Francisco. But what about if the laws change? White says it would be a victimless crime. Well, there’s lots of other victimless crimes that are still crimes, because some of our stupid idiot laws—and then he goes on, and in quotes, he says, “the way I see it—if you have the chance to rent your place out, have it pay your rent, and have all your debt paid off in 8 months or so, and you get a little extra cash every month, but there’s little risk in it, wouldn’t you at least consider it?” Well, I think what’s happened, although the article doesn’t say this, is that he has a rent-controlled apartment in San Francisco now. I hate rent control. It’s a total scam. It never works. And right now, the law is always the slowest thing to catch up, and the entrepreneurs are always the first ones to do something new and innovative. And so, you can’t take your rent-controlled apartment in San Francisco or New York or whatever socialist place and rent it out to someone else legally. But, maybe you can rent it out by the night on Airbnb I guess, because they just haven’t made a law against it yet, which they probably will soon. So, forget about doing it exactly the way he did it. I’m just trying to get you to think in new ways. There are all these new opportunities. You know, on my trip to Europe recently, I rented—I remember I was in Vienna, and I rented a bicycle. And they have all these city bike things. You may have heard of these—this is part of the new sharing economy, and you can rent a city bike—you can pick it up at one location, swipe your credit card in this little machine, it unlocks that bike number in the automated bike rack—there’s no person there, it’s all automatic, technology does it all—and then you return it at any other location around the city. You don’t have to bring it back to where you got it. Which is a pretty convenient thing. And there are companies like Zipcar doing the same thing with automobiles, where unlike a traditional car rental, you have an account with Zipcar or one of these other—I can’t think of the names of the other ones, but there’s lots of them out there. And you can just pick up a car in a city, and then just leave it somewhere else. And it’s all done through the smart phone applications that tell you where cars are. If there’s a car near you. So, I might go out with my friends here in Scottsdale, and that’s maybe a 10-15 minute drive from my home. And we might want to go out and have acouple of drinks, and of course you’d be an idiot to drive. That would be completely stupid. So, we use Uber! And someone whips out their iPhone, and in a second you can tell how far away an Uber car is, which is just a private person who’s driving people around the earn some extra money! And they’ll pick us up in a nice car, they’ll have a couple of cold waters there—it’s much nicer than a taxi, and drive us all to our houses! It’s pretty darn neat. Lyft is the same idea, and Uber has a thing now that they just launched called UberX, which is like 10% lower cost than taxicabs. And so, there are other websites, like Elance.com. I’m on my way to a business conference in Las Vegas, and I recently heard about a website called DogVacay—as in vacation—DogVacay. And my friend Christina, who usually babysits my dog, is going out of town, and she can’t take care of Coco this time. So I thought, gosh! Who am I going to get to babysit the dog this time? I don’t want to just take her to a kennel and board her and have her be in a little dog run. That’s like prison. That’s awful. So I decided I’ll try out this DogVacay thing. I set up a little account, just takes a couple of minutes. I upload a picture of myself, I upload a picture of Coco, who’s just the cutest dog in the world, and then I go searching for people who allow you to hire them to be a pet sitter in their private house. And they have references, and they have a little bit of background in what they do, and DogVacay offers insurance and 24-hour 7-day support, and so, it’s kind of weird! I am leaving my dog with a “stranger,” but on the other hand, with these websites, and with this sharing economy, there are lots of ways to vet people, and lots of ways in which reputation matters. And so, there are some checks and balances. It’s not really as risky as it might seem. And so I’ll be trying out DogVacay for the first time for a couple of days. I hope it works out well. And the person that I found happens to be a certified veterinary technician! Hey! That makes me feel better! And these people earn extra money by taking in dogs. Some people do it at your own house; some people do it at their houses. Some people do a blend of both. But, this has implications for us in so many ways. #1, yes, as a real estate investor, you could use Airbnb or another website like that. For the economy in general, when we hear that the unemployment rate is skyrocketing—there are all these extra ways for people to make money. I think I mentioned Elance.com. There are many others like it. And we didn’t even talk about the whole new revolution in crowdfunding that’s going on. We did have a prior episode about that, but crowdfunding is another amazing thing that will change the world in so many ways. So, there is a whole new economy going on, and really gaining a lot of traction right before our eyes. And this has so many incredibly positive implications for the future of the country, for the future of the world, for other options that we have to rent out our properties, for ways that we can as consumers have new services that help us do things, that we can get lower prices on things, and wow, wow, wow. It’s just an amazing time to be alive. So, so many incredible reasons to be so optimistic. So without further ado, I know I can ramble on forever, check all these websites out that I mentioned. You need someone to help you out with your errands? Check out TaskRabbit.com, or one of the sites like that. They’ll go pick up your groceries, pick up your dry cleaning, deliver things, pick things up, all kinds of things that you can’t even imagine that they’ll do. Creative ideas, too. Check out these websites. You’ll be amazed. They’ll come over and cook you dinner. It’s mind-boggling. You want to throw a dinner party? There’s just all kinds of options. And this is good for us as consumers, but it’s also good for overall employment, for people to be employed and make money so that they can afford to rent our properties from us, right? Anyway. Oh, and before I go, let me just mention the revolution in education that is going on! We’ve talked about the student loan debt crisis. We’ve talked about how college is massively overpriced, in my opinion. Frankly, I just won’t mince words—I think college is a bit of a rip-off nowadays, because college tuition has increased at 2, 3, even 4 times the rate of real inflation. It’s absurd, what has happened to college tuition! The reason for this? The government got in the way! And they started insuring student loans, and as student loans became more plentiful, the classic definition of inflation is, a big supply of dollars chasing a limited supply of goods and services. So all these colleges became like marketing companies, they started doing all of this branding. They started building new gymnasiums to attract students. They took their eye off the ball—it’s not about education, it’s about marketing and selling and branding now, and it’s a rip-off! Okay? College is completely overpriced. If you have a kid that’s college age, there are some other options. One of the great options is the Kahn Academy. K-A-H-N. I mean, incredible. Free. Free higher-level education, for free! From grade school to undergrad to graduate degree level education, on Kahn Academy, by watching these little videos anywhere in the world for free. I mean, it’s an amazing time to be alive. It really is. So, let’s get to our guest today, Clem Chambers, coming to us from the south of France—well, Monaco, to be more specific. That little elite principality, and he’s got some interesting things to say about the history of investing, and be sure to check out www.jasonhartman.com, get a little membership for yourself and enjoy that interview with Gerald Celente. We’re probably going to republish the interview with Harry Dent that we first published to members, but Gerald Celente, we’ll just keep up for the members only probably indefinitely, and a bunch of other great things there for you at www.jasonhartman.com. Let’s get to our guest Clem Chambers; we’ll be with him in just a moment.
PENNY: You know, sometimes I think of Jason Hartman as a walking encyclopedia on the subject of creating wealth.
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JASON HARTMAN: It’s my pleasure to welcome Clem Chambers to the show! He is the CEO of ADVFN, and he will explain that name in just a moment. And he is Europe’s leading stock and investment advisor, and he’s got some good thoughts for us. His latest book is Letters to my Broker: P.S. What do you think of the Market. And he’s coming to us today from one of the most beautiful places, one of my favorites, and that is Monaco. How are you doing, Clem?
CLEM CHAMBERS: I’m doing very well. It’s very, very hot here, but it is very, very pretty, if you like yachts and supercars and high rolling, there’s no better place for you than Monaco, because it’s all here for that.
JASON HARTMAN: I love Monaco, I’ve been there a couple of times, and it’s a gorgeous place. So, tell us a little bit about your book, if you will, and then I’ll ask you to explain that name.
CLEM CHAMBERS: Well, Letters to my Broker came about because I collect antiquarian books about investment, and those kind of books go back into the time of Robinson Crusoe and Daniel Defoe, who wrote some of the first stock market books. And I’ve been collecting them now—not for very long, and I came across this book which basically is completely lost. There’s a few copies, maybe 3 or 4 copies written in 1919, called P.S. What do you think of the Market. And it’s a hilarious book, but it was hilarious because the guy in that book, in 1919, at just the time of the end of the First World War, the time of the Treaty of Versailles, is making all of the mistakes that many day traders make today. He’s making all of the books that investors make 93 years later, and I thought, I’m just going to write a note and to each one of his letters, explain it to modern investors, why he’s doing things that are very similar today, the same old mistakes. So we took the book, we cleared up the English, which was very amusing. Or to a certain extent. And I’ve written notes to each one of these letters. And it’s out on Amazon right now, and it’s proven very popular. Because nothing has changed in 93 years for most investors! They’re still doing the same old tropes.
JASON HARTMAN: That is so true, Clem. History repeats itself, and the more things change, the more they stay the same, as the saying goes.
CLEM CHAMBERS: Well, the funny thing was, I don’t tell people not to invest in a certain way, or not to trade in a certain way. They look at me as if I’ve fallen out of a tree, or planet Mars. And this book is perfect—I say just read this. This guy was doing what you’re doing in 1919, so please, think about not doing it.
JASON HARTMAN: Yeah [LAUGHTER], it’s amazing. Well, tell us specifically about some of those things, and some of those mistakes people are making? I mean, you alluded to them, you mentioned day trading, but be more specific, if you would. Let’s drill down on it a little bit and compare the past with today, if we can.
CLEM CHAMBERS: Well, my favorite one—the very obvious one, the mistake that everybody makes over and over again, is actually to take tips—wild tips from people they meet in bars, or brother-in-laws—
JASON HARTMAN: Or as Rockefeller talked about, his shoeshine boy—
CLEM CHAMBERS: His shoeshine boy. And it’s not just the shoeshine boy that gets it wrong. Most newspapers get it wrong, frankly. Journalists aren’t necssariyl your best financial advisor. And people just love to throw big money at ideas that come out of the blue at random from somebody. And that’s just such a good way of getting poor quick. But people just fall for it every time! If you said to them, why don’t you go out and buy a motorbike—a Harley Davidson—for $10,000. They’d go, well what do you mean, why would I do that? Well, it might be fun. But they will go, and somebody over lunch will say, Apple’s going up this month. And they’ll throw $10,000 at it, you’d be sure. Or $50,000. Ridiculously large amounts of money for what they are actually worth as individuals, and that is just like law number one—don’t follow tips. People were doing it then, and they’re doing it now.
JASON HARTMAN: I wonder what it is, Clem, about human nature that causes us to have that very big defect, that we just do—do we think that a tip from someone is like some secret information, or some insider account of—why would you think—first of all, why do we view some sources as credible at all? And they just aren’t! I mean, they’re obvious. Any logical person would realize this, but sometimes we act so impulsively, it’s just strange.
CLEM CHAMBERS: I think people often—I think the industry as a whole, when it comes to sensible advice, underestimates the compelling nature of speculation. Which is very, very entertaining, but not necessarily in a way that people would immediately think of entertaining. I think of it as a rollercoaster, right? Nothing would get me on a rollercoaster, because at the end of it I’m kissing the ground and I’m feeling sick for about three hours. But people pay good money to go on a rollercoaster ride, even though the whole point of it is feeling like you’re going to die. And a lot of investing is boring, and speculating and trading and all that stuff—it actually is a rollercoaster, and you think, I’m actually gonna die. And people get hooked on the redemption, getting to the end of the rollercoaster and not losing too much, and they get hooked on the feeling that you get after you suffer great pain, which is endorphin. Which is like heroin. And when you lose a lot of money, you get endorphins, because of the pain that it causes you. And this is why actually people gamble in Vegas. They gamble, they play to lose—they don’t play to win. If you play to win, you get over it pretty quick. Compulsive gamblers get hooked on the aftereffects of the pain of losing, and the thrill of escaping a near death experience in terms of finances. So it’s that rollercoaster feeling, the feeling of near death, that aftereffect of a painkiller that you get from this experience.
JASON HARTMAN: So I have a theory about that, and I’d like to expand on what you said, because I think that’s very telling. I think one of the reasons that people like and are attracted to that rollercoaster effect where bad things and good things happen, potentially, or that they gamble and lose money, and then just repeatedly do it—and that’s because modern life has become so easy. We’re so insulated from danger; we’re so insulated from hardship in so many ways in modern life, at least in the Western World, or any reasonably prosperous country, that people are just looking to feel something. I mean, that’s probably why people use drugs, too. They just want to feel more. They want to expand feeling, and that’s what that rollercoaster is. It’s like you said, you mentioned the endorphin high, and even if it’s negative—why do people listen to sad songs? Why do they go to scary movies or depressing movies? They just want to feel something. We’re not feeling enough. We’re not—we don’t have to go slay a Tyrannosaurus Rex anymore, you know.
CLEM CHAMBERS: Well, I think you’re right, and there’s another aspect to that too, which is that people think if they pull the handle, then they get paid. If you go to Wal-Mart and you pull the handle or you stack the shelf, or you go to a job of work, but maybe the work’s not so demanding, and you sit there and you go home, you get paid. So most work—in fact, all work—gets paid, whether you do it well or you do it badly. As long as you don’t get fired, you get paid. Well, the markets aren’t like that. If you do the work, you can lose money. You can not get paid. You can get unpaid. It can cost you. So I think a lot of novice people come with the assumption that if they play, they’ll win something. That it’s only fair that if they put in work, and they take risk, that they’re going to win. So, they come with an assumption that they’re going to win. And that, of course, is going to get you in trouble.
JASON HARTMAN: And that’s sort of the obvious one. I just wanted to expand on it a little bit, and go kind of beyond the hope that you’ll win, and the hope that you’ll get the big payoff gambling, or day trading, or speculating in the markets. But yeah, yeah. Very interesting. Well, tell us more. Maybe one other mistake that you see history repeating itself here?
CLEM CHAMBERS: Well, our investor—who’s not a poor man, he’s basically in the rag trade, he’s probably these days would probably have $4 or $5 million. He doesn’t really understand what it’s costing him. He doesn’t understand that his losses from trading randomly are not winning or losing—they’re actually just the net effect of the drain or the cost that he’s undertaking. So, you know, in the market, you’re right half the time, and you’re wrong half the time, generally, if you’re acting at random. If you’re sticking opinions into the newspaper, as people generally do when they try to invest. And if you pick stocks at random, with no extra knowledge or no edge—it might as well be random—half the time you win, half the time you lose. But if you do that really a lot, your costs mount up. And what people don’t understand is that their losses are generally absolutely equivalent to the costs of doing the investing on speculation that they’re into. So overall, it’s not that they’re right or wrong—it’s that they are spending money in the actual activity itself.
JASON HARTMAN: Yeah, and I think a lot of investors—you know, one of the things they don’t account for in their investments, and this kind of goes with what you’re saying—is the cost of the education that they’re taking, and the publications to which they subscribe, and these various things. That all really—that has to be calculated into the ROI, or the return on investment, because all of that adds up, doesn’t it?
CLEM CHAMBERS: Well it certainly—costs are certainly important. I mean, extremely important, because if you are hoping to get 7% or 8% yet you’re spending 3% in costs, all of a sudden you’re making 5%, and the effect on compounding a percent less, or 2% less, or 3% less, is just catastrophic. So people do miss out on other costs on top of their trading costs. But it must be said that [unintelligible] doesn’t make it easy for you to work out what you’re spending when you’re doing your investment, and they do like to keep their charges obscured. That’s to say, they don’t push them into your face.
JASON HARTMAN: Yeah, I mean, reading those statements is incredibly difficult sometimes, but what you don’t even see is what’s underneath the statements—what’s hidden into a fund, or if it’s a direct stock investment in a company, all of the board of directors and the C-level executives are skimming all the profits all the top, so those really are part of your investment costs, and you know, you read the annual report, but it’s all hidden. And nobody can really understand all that anyway.
CLEM CHAMBERS: I mean, it must be said that that’s where skill and expertise comes in. Because as you dig further and further and further, and as you spend more days, weeks, months, years learning the skills, so your returns get better. So, an education will bring you better returns. And it’s very difficult to jump in and make good profits to start off with, because obviously it’s a skill game. It’s a money skill game, and like all money skill games, you’re playing against highly skilled people, and therefore it’s hard to win. I always remind people particularly—I mean, investing’s different. Because if you invest over 3, 4, 5 years, I think you always end up in a relatively good situation, if you put the effort in. But trading is exceptionally difficult, and I always remind people of a poker hall near where we are in the city of London, and the poker hall says—“city poker hall, beginners welcome.”
JASON HARTMAN: Yeah, beginners welcome [LAUGHTER]. That’s what Wall Street really is. Middle class, beginners, people with less knowledge and no connections, and certainly no high speed trading equipment with servers right next to the exchange, and the fastest computers made in the world, and algorithms done by quants who are literally rocket scientists. They don’t have any of that, do they?
CLEM CHAMBERS: Well, exactly. But there’s still plenty of space for the investor, because if you look at the industry—the fund industry—they’re all working within a quarter, 6 month, yearly timeline. They’re not really looking out after a year. So it’s a green field with very little in it when you get past a year. So people are taking the view, they can actually capture what is a neglected opportunity. Now, same goes for smaller caps, and I won’t say market caps, because that’s very difficult, but smaller companies—which in America would be anything under a billion dollars in market cap—those sort of companies, which are really left alone by most funds. They don’t really like to play in companies below a billion or two. In fact, they can’t, because the liquidity’s not there for them. There are still plenty of opportunities for investors in the market, where there are whole areas the professionals don’t claim. So, there’s just—it’s a sport for choice, if they want to put the work in, and if they want to put the studying in. If they want to read sensible books on investing. You know, it’s really not like trading rocket science to invest, if you want to beat the treasury, right? It’s not too difficult at all. However, it’s people getting excited by the prospect, and suddenly following some crazy stocks that are the latest and greatest trade—trying to invest in Facebook, etcetera. That’s where they get into trouble. Because they go for things that are exciting, rather than things that are boring. And I always advise against investing in any stock that’s at all exciting.
JASON HARTMAN: Well, the unexciting stocks are very possibly the best ones. That goes without saying. Sounds good. Well, just give us your thoughts on the markets in general, and the economies of the world in general as well, if you would. I just got back from Europe a few days ago, and I gotta tell you, I really saw, especially in Spain, especially in Barcelona, a lot of desperation. I think that we’ve got a lot more storm clouds on the horizon. But, those storm clouds, in many ways, will create opportunities for many people. Give us your thoughts, if you would.
CLEM CHAMBERS: Well, first of all, when you start to try to buy property in these countries, you wonder who’s got all the money. So there is desperation, amongst a certain group of people. There’s a money in these countries, and also they’re quite small, so yes, it is very hard work if you’re in Spain. It’s always been pretty grim in Portugal, frankly. Although if you go down to the enclaves by the Old Guard where the rich people hang out, then you wouldn’t think that was so bad. So, really what they’ve had, is they’ve just gone broke. And it’s like any country that goes broke. The people that have been living off of the fat of the land from that boom and that bubble, are all of a sudden left washed up on the beach. And they don’t know what to do, because they’ve never had jobs. They had jobs to go to, but they weren’t doing anything! They were employed by the government to push paper around. Lots of these places, when you go around in Spain, for example—there’ll be a roundabout every 200 yards! You’ll be driving through practically a desert, and there’ll be a motorway. You’ll be seeing a statue in the new town square in every village you go to, and all these people that are being put in these marvelous modern art statues, and all of these people that’ve been building these roundabouts—I’m sure it’s hard to lug the rock. But they’re not jobs! They’re not creating wealth! And these countries built up a lot of non-wealth-creating sector, and that sectors have to be cut back, so the people who’ve been in these non-jobs, building these roads to nowhere—all of a sudden are left high and dry, and that is a very painful thing. But really, these countries need to create more wealth before they spend it, because they’ve certainly spent it, and a lot of the southern countries have spent up to their all possible credit limits, and they’re now wreaking the havoc from that. But it’s not so bad in the north. In Germany, in Holland, and even in Great Britain, it’s coming back quite strongly. Not as strongly as the US.
JASON HARTMAN: So, do you think—I mean, if you look at the US, though, and you look at Great Britain, I mean, do you think those are really recoveries? And I say that in quotes—“recoveries”—based on the creation of just more currency, and pumping money into the system? Or are they sound, legitimate recoveries? I mean, you look at the debt levels, and it’s just unbelievable.
CLEM CHAMBERS: Countries in the west have built unsustainable public sectors, and they haven’t been stripping them back, and that’s a big mistake. America has an increasingly large public sector, and it hasn’t stripped it back. If you have too many people redistributing wealth as a ratio to people creating wealth, you’re going to have a financial problem. Like any company, it’s like have a headquarters that’s too big for the factory. And America is in that state, and Europe’s in that state, and they’re suffering. That’s why they can’t get fast growth; because every time somebody makes a penny, it’s stripped out by the public sector. If you look at the private sector GDP of countries like Britain—and I don’t mean overall picture of GDP, because GDP includes public sector spending. If you strip out the public sector spending from the GDP, and you look at the taxation load, you will find that governments are taking all the public sector GDP through the tax system. They’re taking a lot. Every penny that the private sector makes is being consumed by the public sector. Well, that is not a recipe for growth, and that is the key to the problem. Now, the trouble is, if I am a president or a prime minister, and I say, chop my public sector in half, well, all of a sudden, GDP collapses, because a lot of GDP is public sector spending. So I now have to stand up and explain why my GDP has collapsed, even though it wasn’t meaningful. So, they’re trapped in this GDP paradox, because people don’t understand, that magic number includes all this wastage that goes on in the public sector. I mean, America is just—it’s amazing, it’s amazing what America wastes its money on. It spends $50 million to kill a Taliban, for example. It was a million people in the secret services. No wonder they’ve got a problem with keeping it all secret! And it’s just, the litany of public sector wastage, both in America and in Europe is just beyond belief. You would go so fast out of business in the private sector working like that. You wouldn’t even make the stock exchange. You’d just go bust. So, it’s very hard to have a recovery when you have this massive creature sucking the blood out of the private sector. And till that’s addressed, we’re going to be in a sluggish area of growth. And if you look into Asia, their mix of GDP to taxation is way down. It’s like 19% in China. And China, oddly enough, since 2000, or since 9/11, China’s GDP has grown about 600%. America’s has grown 50%. So, I mean, that says it all, doesn’t it, really? If your country’s growing at such a pace on GDP, or your country isn’t growing, why isn’t it growing? Well, you can’t grow your GDP by redistributing wealth. Stalin tried it—it doesn’t work.
JASON HARTMAN: Of course it doesn’t work, yeah.
CLEM CHAMBERS: You have to have a very powerful private sector, and to do that, you have to make room for it. And that’s what has to happen here.
JASON HARTMAN: So, is the future inflationary or deflationary?
CLEM CHAMBERS: Well, it’s a very interesting question. If you look at the mountains of debt out there, and you say, how are they going to get out of that, apart from grinding through this for the next 150 years, the answer is inflation. You don’t have to have very much inflation for very long to halve these debt levels, if you manage to nail your costs down. So, the easy way out, the historic way out, the way out that’s worked ever since Nero fiddled his [unintelligible] was inflation. It’s a question of when would it happen. Now, there’s only—
JASON HARTMAN: It’s really a very good business plan. If I was a government administrator, as much as I hate it philosophically, you know, especially when I have the reserve currency like the US, just inflating your way out of the debt, it’s such an easy, brilliant strategy.
CLEM CHAMBERS: And you don’t have to do it by much. If you cut it in half, you’d be back to where you started from.
JASON HARTMAN: I know, it’s amazing!
CLEM CHAMBERS: Half is not a great deal. I mean, you don’t have to wait 10 years to get that happening anyway, in normal conditions.
JASON HARTMAN: Yeah. Absolutely true. But what else were you going to say about inflation?
CLEM CHAMBERS: The only question mark is this, and it’s the Japanese question mark. If your state sector believes that your whole population is aging, then they might go for the deflationary route. Because if you want to look at inflation, inflation takes money from the old and gives it to the young. That’s why young growing populations like inflation—because the old peoples’ savings are eroded, and the people that do well are the borrowers, the young people, and they’re the people that succeed in an inflationary environment. If you have a deflationary environment, it’s the young people that have their money and resources drained from them, and it goes to the old people, which is why you have that situation in Japan, or up till recently you had that situation in Japan. So, if a European super state, or one of the members of the European state thought that they had an aging population that they couldn’t get out of, then they would actually probably actively promote deflation, because that means the savings of the old go up, while the young people work as hard as they possibly can [unintelligible] full employment, but all their money gets eaten up by the fact they have to borrow money for houses, and they’re borrowers rather than lenders.
JASON HARTMAN: Yeah, no question about it. Do you think Japan’s going to default?
CLEM CHAMBERS: No, because Japan is actually—all their money is owed to Japanese, and the Japanese would all jump off a cliff together if that was agreed on. So I don’t think Japanese government has to default on its own investors. What will happen—well, there’s a big battle going on between the Bank of Japan, which is deflationary, because they believe in the model that I just said about deflating and therefore bailing out the old people, and putting the weight of the country on the back of the young, which after all seems kind of quite ethical, in a certain sense. And they want deflation. Whereas the politicians want inflation—politicians always want inflation, generally speaking, because it makes everybody happy and then I get voted in again. So there’s a big battle between the deflationary Bank of Japan, and [Shinzō] Abe, the new Prime Minister, who wants inflation. The trouble is, the Bank of Japan is in control of the whole country, because it’s been in control strategically over the money supply forever, and if you’re in control of the money supply, you’re in control of the country, aren’t you? It’s like having a partner in business, and they’ve got the checkbook. Or like paying your salary into a joint account, and your partner in life gets to write all the bills, and checks for the bills. Basically, he with the checkbook, or she with the checkbook, runs the country. So, the Bank of Japan has got pretty much a stranglehold on Japanese strategy, and unless Abe can break that in the next 6 or 9 months, then this inflation won’t happen.
JASON HARTMAN: Yeah, no question about it. That’s a very good point. Well, give out your website, and tell people where they can learn more about you and get your book.
CLEM CHAMBERS: Well, it’s ADVFN, and Investor’s Hub, those are two websites on the Internet. We’re basically providers of global information for stocks and shares and [unintelligible] and Forex, etcetera, etcetera, and lots of racy chat about stocks and what’s hot and what isn’t hot and who’s ramping and who’s deramping, and what’s going to double overnight and all that crazy stuff that our traders love. And we specialize in that.
JASON HARTMAN: It’s so funny you say that after what you said at the beginning of the show! You know your market!
CLEM CHAMBERS: They love it! I can’t tell them any different! I tell them, go read my books about investing, but they don’t want to know! They want to know what’s going to go up 40% tomorrow!
JASON HARTMAN: It’s like a sickness, it’s an addiction.
CLEM CHAMBERS: It’s an entertainment, maybe. I like to this of it like that. But anyway, my book, Letters to my Broker: P.S. What do you think of the Market, by me, Clem Chambers, is actually on Amazon, and you can get any number of my books there. I’ve got a book on value investing, for those sensible people out there, all 7 of you.
JASON HARTMAN: All 7 of you [LAUGHTER]. I love that.
CLEM CHAMBERS: There’s another one on picking long term stocks, which might be a little bit more exciting than that—
JASON HARTMAN: And one of those 7 is Warren Buffet, so you’ve got 6 more.
CLEM CHAMBERS: And one is me, so there’s another 5 people out there. And one’s you, so we’re down to 4 now. So the other 4 people—and then I’ve got four thrillers out there, which are just action fiction, if you fancy that. One’s called The First Horseman, which is my latest one. So there’s plenty to choose from, from me, Clem Chambers, and please—push me up the rankings on Amazon in the next few hours! I like that.
JASON HARTMAN: Alright Clem. Well hey, thank you so much for joining us. That’s Clem Chambers, and you heard it right from him, and go back to life in Monaco—it’s pretty darn nice there other than the heat, but beautiful place.
CLEM CHAMBERS: Thanks so much, Jason.
JASON HARTMAN: Alright, take care.
CLEM CHAMBERS: Cheers. Goodbye.
ANNOUNCER: This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews, please visit www.HartmanMedia.com, or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, or business professional for any individualized advice. Opinions of guests are their own, and the host is acting on behalf of Platinum Properties Investor Network, Inc. exclusively. (Image: Flickr | Amazing Penny)
Transcribed by David
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