Jason Hartman starts the show discussing using your credit score as an asset. He goes over the different aspects of your credit score and the credit rating industry. He emphasizes that if you have a very high credit score, it is likely you aren’t using it enough. Later he discusses the Federal Reserve’s role in inflation and why it has been doing a terrible job. Jason ends the show discussing a gene test he took.
Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made 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. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:52
Welcome listeners from around the world and Happy Easter to all this is Episode 982 908 too, and this is your host, Jason Hartman. I want to wish everybody around the world a very Happy Easter, as you celebrate today, well, you’re not hearing this on Easter day. But you’ll hear it the next day anyway, that’s when I’m recording it. Several things going on in the world. As always, I interviewed a very interesting guest, which will be coming up on the show, an economist, who we are trying to book as a speaker for our venture lions mastermind in New York City coming up on Memorial Day weekend. So venture Alliance members, I’m sure you’ll love that. Non members, if you want to join us for that event, you can always come as a guest with a one time guest fee, or check out full membership as well. Venture Alliance mastermind.com. Anyway, one of the things in reading his book, and of course, he’ll be coming up on the show. Did you realize that the Federal Reserve, of course the Federal Reserve, our central bank that we’ve talked about a zillion times on the show Over the years, well, one of their charters of course was to even out to lessen the rollercoaster ride. That is the economy. Well, since the Federal Reserve was created, and of course, we took a venture Alliance mastermind trip to the place where it was created Jekyll Island, Georgia, a beautiful resort there that we stayed at. And we had our our venture lions mastermind meeting in the Federal Reserve room, the very room where they created the Federal Reserve. Boy, that was a very hysterical, I mean, historical, a very historical occasion to do our venture lions meeting there. But one of the big charters one of the big sales pitches, if you will, to the people to us to the hoi polloi us. Poor little people that need to be protected was that they would even out the ups and the downs, the peaks. In the trough the highs and the lows in the economy. And of course, what 1518 years after 17 years after the creation of the Federal Reserve was the great recession, the biggest, the biggest Valley in the economy so far. And then, of course, seven decades later, just what 10 years ago, we had the great recession, almost as bad. But there have been 18 major recessions since the creation of the Federal Reserve. And since the time the Federal Reserve was created 25% of the time that has gone by that has occurred since then. The economy has been in a recession one quarter of the time. How are they doing? What’s the report card on the Federal Reserve? Well, it ain’t that great folks, and Ain’t that great, but pretty interesting stuff. I just thought I’d share that with you as a very big general view on a future episode. One of the things I’ve been studying lately is the L EA I. Yes. You know what the Li is, while we talk about different things, different acronyms on the show, of course. Well, that’s the leading economic indicators. And I want to take a bit of a deep dive into that. So I have been doing my homework on your behalf, studying up on the LSI, the leading economic indicators, and we’re going to talk about that on a future episode. So look forward to that. Maybe I’ll even talk about it from the Ice Hotel in Sweden, because I’m on my way there in just a couple of days. Yes, I am headed for Stockholm, Sweden. And then we are headed as part of the venture lions mastermind to the Ice Hotel. It’s going to be very cool. Pardon the pun, and I hope we get to see the Northern Lights. I have never seen that and probably most of you listening how Never seen it. It looks incredible from the photos. We’re gonna report back on that. But the Ice Hotel supposedly has really interesting acoustics. And when you are a podcaster, you look for acoustics. And yeah, well, we’ll see. We’ll see if we can record an episode from the Ice Hotel. I want to talk to you today about several things. And time permitting. I want to have a listener question a listener who had a great question. We recorded that several weeks ago, but just haven’t had a chance to get it on air yet. And I’ve got a bunch of things we’ve recorded that we got to get on the air for you. So we will dole that out as time permits as time permits. Gosh, you know, I was watching a documentary recently, well, Monday, actually, just several days ago, was watching a documentary, and they were talking about the financial crisis, the Great Recession, and they were talking about Goldman Sachs, the criminals and the leading criminal organization. Arguably on Wall Street, Goldman Sachs, of course, this is not necessarily technically criminal behavior, because of course, they have so many lobbyists and lawyers and accountants that they can make what I would consider just as a common man as a layman. I would consider it to be criminal behavior, but they can make it look like it, you know, isn’t really criminal. And of course, nobody actually goes to jail. They just pay a big fine and fines for these big companies. These, these big organizations, fines are just part of their business plan, just part of the business plan. So let me play for you a one minute clip from this CNBC documentary. It was really interesting. They’re all on Netflix or Amazon Prime. I can’t remember which one. Oh, and by the way, just for the record, folks, just for the record, speaking of Amazon, Trump, love him or hate him. Trump is right about Amazon. They are going to gobble up and destroy all of these businesses. They’ve already done it massively. We are obviously in the midst of the retail apocalypse. You’ve heard me talk about many times, as we see vacant retail centers all across the country really all over the world. Now, these businesses just being destroyed by Amazon, right? Which Look, this is creative destruction. The Economist Joseph Schumpeter talked about it, it is an okay legitimate thing. So long as it’s fair, and it’s not a violation of antitrust laws. And interestingly, Trump is right about Amazon. I’m gonna just put that out there, no matter what you think, love him or hate him. He’s not right about everything. He’s a bit of a buffoon, certainly, and, you know, a controversial character, for sure. But he’s right about this. And he’s right about some other things. A few other things he’s got right. And I’m right, I am right about Facebook and Google. These are the scariest companies on earth. And Thankfully, Facebook’s stock has just gotten pummeled recently yay, yay. But you know, it doesn’t matter to these guys because they’re so mega rich. It’s irrelevant, right? But these are the scariest companies on Earth. They know way too much. They are violating antitrust laws, in my humble opinion. Probably not. Technically, obviously, the government hasn’t nailed them yet. But these companies are becoming too big to fail. They need to be chopped up into smaller parts, or regulated like utilities. Yes, the libertarian Jason Hartman is actually saying that, I don’t know maybe I’m contradicting my own beliefs, but I’m okay with it, folks. These companies scare the hell out of me, Amazon, Facebook, Google. They’re just too big. Any company that controls this much of our our news, our thoughts, our information, the stuff we get to say, sensors, sensors, videos, scary scary stuff, scary stuff. So we got to bust them up. Okay. I want to play for you this little clip from this excellent CNBC documentary about Goldman Sachs. And then I want to talk about FICO scores and your credit score. And I want to take a little bit of a deep dive it won’t take very long, just a few minutes on some different types of FICO scores, what they mean. And of course, maybe a little bit about how you can improve them. Because your FICO score on your personal balance sheet. One of your assets is your ability to borrow your credit, right? And we’re always going to try and help you have better credit and manage your credit. But first, I want to play for you this little clip that illustrates how the disgusting folks at Goldman Sachs or playing both sides of the market and violating their obligation to their own clients. Listen to this.
A clip from ‘CNBC’ 9:55
Goldman used to tuts and deal to bet against the mortgages and it’s sold as investments Just months earlier, it started with homes like this at 785 wayside road in Cleveland. In 2006, Goldman bought the mortgage on this house, hold it with others and created a mortgage backed security that it offered to customers. This empty lot on wayside is where that home one stood. It turns out, Goldman made two deals that included the mortgage for this home. In the same year, the mortgage backed security and the Hudson synthetic CDO. In the first, Goldman offered an investment to customers who expected the mortgages would be paid back. And Hudson Goldman was wagering its own money that the mortgages would not be paid back. That raises the question was the bank selling investments it assumed would go back? Goldman insists it was not.
Jason Hartman 10:50
So Isn’t that interesting? That’s how Wall Street operates folks and when you invest on Wall Street, that’s just one example of the zillions of conflicts of First, you know, I watched the interesting documentary also about Bernie Ebers. Remember Bernie Ebers. Yes, Bernie Edwards WorldCom. Right, you know, bought MCI was the hero of Wall Street until he wasn’t until he wasn’t. There are many companies out there like this, that are always the darlings of the community. You know, maybe they’ve got a little fund where they’re doing real estate syndications, or they’re a big Wall Street firm. And then, you know, you wait five or seven years and you find out they’re a bunch of disgusting criminals, and they’ve been ripping people off ripping people off. So don’t let it happen to you don’t fall into their trap. Okay, let’s talk about FICO scores for a moment. So maybe you don’t know this. I’ve talked about it before on the show. But there are several different FICO scores. Of course, you know, there are three major credit bureaus, right Experian, TransUnion, Equifax, so there are three bureaus But in addition to the three bureaus, if that wasn’t complicated enough, you’ve got all of the the ways that impact your FICO score, right? You’ve got, you know, your payment history, your utilization ratio, how much credit is available to you versus how much you’ve actually used, right? And the more you’ve used, the greater your risk and the lower your score. You’ve got the number of inquiries on your credit report. And then there are hard and soft inquiries on your report. There are all these different nuances and complexities well, to make matters even more complicated. There are several different FICO scoring models. Okay. You’ve got the three bureaus which all have a different score for you probably okay, they certainly do for me. I mean, you know it to have the Bureau’s my scores are like 729 and 734 at one of the Bureau’s. It’s way lower, and I can’t figure out why I’m trying to fix that, but It’s like, I don’t know, 30 points lower, and it just bugs the heck out of me. So that’s the three bureaus, the makeup of the Bureau’s right now. Also, I want to say one thing, and I’ve said this before, if your credit score is too high, I believe I say you are making a mistake. Yes, a mistake. Now why would that ever be considered a bad thing? To have a credit score that is 850? For example, credit scores go from 300 at the low up to 850. Okay, if your score is 850, you have not borrowed enough money. Yes, you heard it right here. You are not borrowing enough money. Now I’m not encouraging that you go out and borrow in terms of getting rip off student loans or credit card debt or anything like that. I am simply encouraging that you borrow to buy more properties. So it’s like the person who says I’ve heard this in real estate. I remember realtors when I was in the tradition. side of the real estate industry saying this? Well, you know, I’ve never had a deal fall out of escrow. You know? Oh, well, how many deals you do last year? Three, you know, clearly you are not doing enough if you’ve never had a deal fall through, right? Okay, you know. So this is the kind of the same mentality. Look, folks, if you’ve never had any failures in life, you’re not doing anything in life. You’re not taking any risk when you put yourself out there, and you’re courageous, and you’re a risk taker. And I don’t mean imprudent stupid risk taker, obviously. But when you do things in the world, when you make dust in the world, when you make things happen, you’re gonna have some problems, okay? It’s like the person that says, Well, you know, I’ve never been in a lawsuit. Well, what have you actually done in your life, it’s like, you never have any problems with vendors. If you have like, three Transactions a month. But guess what, when you have hundreds of transactions a month, the law of large numbers says you’re gonna have a few that go bad, you’re gonna have a few problems. And the law of large numbers, by the way also works in your investment portfolio. So if you have one property, you know, you’ve heard this before, right? You know what I’m going to say, if you have one property, and it goes vacant, or the tenant doesn’t pay, well, 100% of your portfolio has gone bad. If you have many properties, you put the law of large numbers on your side, right? Because that law of large numbers says that over the portfolio, you spread the risk and you start to get a decent consistent yield, right? Because the law of large numbers works in good ways and bad ways. You know, if you have a lot of transactions, you’re bound to have some problems because you’ve got a lot of vendors you’re dealing with, right? And I’m talking about, you know, for you folks in business, but hey, even if you’re not in business, if you have a complicated life, and and you You’ve got a boat, you’ve got a plane and you’ve got a big house and landscaping people and contractors coming in all the time, and you’re cutting a lot of checks every month, and you’re paying for a lot of stuff. Hopefully that’s not your life. I’ve had that life. I don’t like it. I used to own a boat. I bought two airplanes. I had a 48 foot yacht. I have a big motorhome a 38 foot motorhome, I’ve had all these stupid toys, don’t buy them. They’re a ripoff. Don’t buy them don’t buy them they depreciate buy some more properties. I’ve been there, I’ve done it, take it for me. It’s not worth it at her to rent than buy. Because no matter what you think you will use all those toys far less than you think you’re going to use them. So just rent them from somebody else. And in the sharing economy. It’s so easy to do that nowadays. There are so many ways to do it. Okay, thank you got the point. If you don’t know the point, then just go to Jason Hartman comm slash ask Jason hartman.com slash ask and I will try and address your questions on By the way, we’ve accumulated quite a bit of those lately. So thank you for participating in Jason hartman.com slash ask. And by the way also, thank you for all of you who are registering, like we are selling tickets like hotcakes, I guess hotcakes. So pretty fast for our Philadelphia event. We’ve got a super swanky hotel, and we’ve got the largest room at that hotel. This event will definitely sell out our Philadelphia event coming up in May. So Jason hartman.com, click on events, get your tickets. Okay, FICO scores. So the ranges from 300 to 855. Go score eight, the eight scoring model is the most widely used version. Okay, now, let me go through several of the versions here. Now, there may be more versions than this. Okay, but 504 Let’s go through the four model FIFO four, right. FIFO. Four is an older version. But the real estate industry is kind of an archaic industry. Embrace the fragmentation, right? You’ve heard me say that, and put up with the inefficiencies in the market. That’s how you’ll make money. Because some people don’t want to put up with those inefficiencies. If you’re willing to tolerate them, then you’ve got a barrier to entry, right? There’s a barrier to entry and you’ve gone over the barrier or through the barrier. And so you’re getting the yield that other people who are unwilling to do that will never get right. They will never make that money that you made. So 504 is most widely used in Guess what? mortgage financing? Yes, so when you buy that property 504 is probably the model being used FIFO eight, eight, number eight number four FIFO. Eight is most used in automobile financing. So if you go buy or lease a car, they’re likely to use the FICO eight score. Now I can tell you my FICO eight score, for example, is 750. It’s quite good Right, but my FICO Four score is 711. It’s not as good. By the way, I have to say I don’t know which bureau I’m talking about because remember, the score is gonna vary at all three credit bureaus. Okay. So you got the Bureau’s the score will vary, and then you’ve got all the FICO scoring models the score will vary, right? Okay, so let’s talk about credit cards here. Okay, by the way, there’s a FIFO for auto source score. Okay, so sometimes automobile financing uses it, but mostly it’s for mortgage financing 504. Okay, what about credit cards? What about credit cards? Mostly, they are using FICO eight and four. They’re mostly using eight actually eight is the most common one they used to use for most of the bank card credit card. lenders are using FICO eight now. Okay, FICO eight. Now, interestingly, there’s not only a FICO eight God, this does get complicated, doesn’t it? There is a FICO eight bank card score, and a FICO eight auto score. And they’re different. Mine are different. Okay, I’m looking at them right now I’m looking at my own scores. And then of course, all three bureaus, and they’re gonna vary there. So my FICO eight bank card score is outstanding. It’s probably too high 762. Remember, you don’t want to have your scores be too high, because if they’re too high, you’re not using enough credit. So I could go out and borrow some more money. I have this nagging urge to get into debt, which by the way, you know, that guest that I recently interviewed that will be coming up soon on a show, and hopefully speaking at our venture Alliance mastermind in New York City if we can get him because he’s an East Coast person. He said something very interesting to me. This was kind of fascinating. This particular person has millennial children. And as a big fan of of the millennial generation, you know, the millennial generation gets a lot of they get kind of a lot of bad press that they deserve some of it but not all of it maybe Okay, so you know it look at there’s goods and Bad’s and everybody and everything and, and you got to weigh it all out. Right. So the bad thing about the millennials is they’re, you know, they’re kind of spoiled, right. You know, they’ve been, they’ve been catered to they’ve been carted around to soccer practice, you know, they’re definitely not latchkey kids. I was a latchkey kid, you know, I kind of had to fend for myself. You know, I didn’t have much guidance as a kid. Now these millennials, they’ve had maybe too much guidance and never learned to be independent. Right? Maybe I couldn’t have a little more you’re probably thinking that. Okay, so they’re good and bad. But one of the very interesting things this guest said to me, and you’ll hear this episode coming up. He said, you know, a millennial doesn’t really understand anything about Guess what? inflation? Yeah, they have no real concept whatsoever of inflation. They’ve never lived through it. They don’t understand even though the concept of how prices would rise, asset values would rise really fast. Well, certainly they’ve had an asset inflation. But you know, they’re not really in the market buying much of those assets yet. So, as they enter that market, if they can enter that market, and we’ve talked about that on many prior shows, we shall see, we shall see but but yeah, you know, he was right. I mean, a millennial person who’s 18 to 34 years old, say, you know, they never really saw inflation during their lifetime. Now, I saw inflation. I saw inflation for sure. I remember when I was a kid, thinking about inflation and how prices were just, you know, rising, rising, rising, you know, it’s interesting how that all goes. So we’ll see how they react to that. So more on that in an upcoming episode. Okay. So bank card score number four, and bank card score number eight, eight being the newer version, the four being the older version. Okay, what about some new versions of FIFO can Guess what? There’s a FICO nine. That is the newest version of FICO scoring FICO nine, and it is now being used in auto lending and with bank cards or credit cards. Okay? Not the mortgage industry is still using the old one. And you know what that does not surprise me at all. That does not surprise me at all. I want to give you a word of caution On another subject here. And I want to talk to you about the rented home myth for just a quick moment here. Most of the properties we sell are on rented. We sell some rented properties. We have one investment counselor, I’ve our team that does not like to sell rented properties. Now this particular investment counselor is very much actually against rented properties. Because with a rented property. You can I don’t want to say never, but you will likely not have a very good quality home inspection. Certainly you should always get a Home Inspection. But with an unwanted property, there is very little argument as to the condition of that property. Right. And when our local market specialist sells you that property, you know what you’re getting a lot better in a vacant property than a rented property, it would seem on the face of it, that rented property is better. But the rental market is so hot right now, that getting properties rented is certainly not a problem. Not a problem. I mean, occasionally, there’s an outlier case where it is a problem. But by and large, you know, it’s like one out of 250 where there is a problem getting a property rented quickly, properties or renting very quickly. So this is counterintuitive, okay? But just understand when a tenant has got all their junk in a property all their furniture and a property. The home inspector is not moving They’re sofa to look at the floor underneath their sofa, they’re not taking down the pictures on the walls to look at the walls, there’s just some stuff, they can’t really investigate very well. And the home inspector may come there and inspect the property that’s rented with a tenant in it. And they may want to be polite, and you know, so they won’t really, you know, flush the toilets as well or, you know, run the dishwasher or, you know, do all the stuff they’re going to do. They may not really know who’s around like they will in a nice, simple, vacant property. So a clean, vacant house can be a safer deal than a rented property. it’s counterintuitive. That’s why I’m raising the issue. I’m not saying never buy a rented property. I’m just saying there is an extra step of concern and caution there that you should be aware of. Also, always make sure that if there are punch list items That are not finished not taken care of in that inspection as I’ve talked about before, have the inspector go back and re inspect before you close and do not accept a promise from the seller that they will do things. only accept money. Yes, money cash touching, get some money, have them leave money in the escrow account with a closing attorney with the title company. That’s more than enough to cover those items. If they cannot do it before closing. Protect yourself. Protect yourself. Okay, last thing I want to share today. DNA. Yes. Da. What is it deoxyribonucleic acid. Hey, I took biology class and anatomy and physiology to Okay, so I actually kind of liked that stuff. You know, it could have been a scientist maybe? Yeah, probably not. Okay. Anyway, I thought I kind of had an aptitude for that in high school and my whole two years of college before I didn’t finish. Anyway, so good old DNA. resisted this for many years. You know me, I don’t like the Orwellian Big Brother society in which we live. And you know, we’re all giving into it in one way or another. You got a new car with a GPS chip. Your phone has a GPS chip. They know where you are. Edward Snowden taught us that the NSA is frequently hot making our phones and our computers and our iPads and they’re listening, or they’re even hot miking the camera and turning it on when you don’t know what’s on Scary, scary stuff. Do any internet searches. Google has kept every internet search since the beginning of the company. absolutely disgusting. absolutely disgusting. I mean, Google, scariest company the human race has ever known. See all of your constitutional rights? Well, if you’re in the United States, all of your constitutional rights to privacy and such are only rights against the government, not against private companies. And guess what when private companies get too be in bed with the government, you have no protection, yet they’re sharing the data with the government. So the private company is just a frickin proxy for the government. What’s the difference? The government might as well violate our rights directly, you know, our constitutional our civil rights in the first 10 amendments to the Constitution, the Bill of Rights, one of the greatest things humanity has ever known. Finally, I mean, there was the Magna Carta. And then there was the US Constitution. And the US Constitution was a very special document. Why was it so special? Because it was really one of the first times a government charter told the government that the government was here for the people, not for the government’s benefit. We the people, you know, right. That was the whole concept. And it’s a government of the people, by the people and for the people now, certainly, I doubt we have that up. probably agree with me. But at least the document is still there. And it’s still standing and it still says it. But it was the first time that a government document actually limited the power of the government and said, the individual has all these rights. And the government does not have these rights. What a beautiful thing. What a beautiful thing. I mean, it’s beautiful, right? Well, big brother. So I finally gave in, and I did one of those DNA tests. Yep. I did it because I wanted to know about my ancestry and my health. Well, just a few days ago, someone emailed me through that companies website and said, I believe I am your cousin. And I guess this probably can’t be faked. Because or at least not easily faked. Because the company that does the DNA, you know, shows that this person is like a 10% DNA match with me. And, you know, said, Hey, I’m trying to find my biological father. This person says, so I’ve been helping them do this. It’s quite interesting. And I think I think it may actually be true. You know, at first I thought this probably some kind of a scam, but I don’t think it’s a scam. So it’s pretty interesting stuff, you know, I hate to be in a database, but I figure, hey, the government’s probably already got all of our DNA in a database and they’re just not telling us. So, so we shall see. But just thought I’d share that interesting story as it is unfolding with you. And if you’ve done your DNA test, and you know, I did it on Coco the dog, my dog. That was a, I don’t know, semi interesting. I don’t think it was super accurate, but we’ll see. So if you’ve ever done that, and you have anything to share, go to Jason Hartman comm slash ask and tell me about it. I love to hear about your experiences. Anyway. That’s it for today, folks, we’ve got to wrap up in the interest of time. We got a great episode coming up in a couple of days. On the next episode, I will be in Sweden. I will be in Stockholm and then the day after that at the Ice Hotel in northern Sweden. So I’ll be in the Arctic Circle talking to you from a very chilly place. So until then, over and out, happy investing, and I’ll talk to you in a couple days on the next episode.
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