When you look at prices, are things expensive or are they cheap? And are they expensive or cheap compared to what relative to what? Now a lot of people think that real estate is way too expensive. It's at record highs, but expensive compared to what compared to U. S. Dollars or compared to gold or oil, or rice or orange juice. And you need to understand there's a difference of price than U. S dollars and purchasing power, the purchasing power
of those units. When you understand from this perspective, you get a whole new way to look at things. And so today I am joined by my good friend Jason Hartman. He's a real estate expert, a market analyst, and he is going to show us a new way to look at things and reframe things so that you can have more success. Um. He's got the facts, the data. Uh Um. I took a ton of notes. This is something that really good and it's going to give a different perspective
on where we're at in the market. We're at the market sect and we also dig into some tough topics including um where I where he thinks we're going in the future, how you should look at the market. If you're a real estate investor or a homeowner. UM, what factors like Wells Fargo shutting off lending does? What factors like black Rock and Wall Street jumping into buy um all the residential real estate what those do? Um? And even guessing what the FED might do with housing? So
many good topics that we jumped in with Jason. Um. It really gives you a whole new perspective that I think is powerful. So let's go ahead, just jump right in. Everyone. Welcome to another episode of the Market Disruptors Show. And today I am joined again by my good friend Jason Hartman, who is a market analyst and a real estate expert, and he has come up with some amazing ways to look at the data in the markets and maybe even tell us where things are going. So Jason, thank you
so much for coming back and joining us again. Market's great to be here. And yes, uh, you know for so many years or decades that I've been in the real estate business uh and and real estate investing. I bought my first rental property when I was twenty years old. Uh. You know, Uh, the magic question that is always what's going to happen next? Right? How do we predict the market cycles and you teach people that all the time
on your show. And Um, so I've I've developed an index uh and it basically is a measuring stick comparing real estate prices to many other things in the world. Uh. And I believe they can tell us where we've been, where we are now, and where we're going in the future. That's interesting on so many levels for me. Um. I've been working on this big thesis on cycles, which I know I've shared with you and and and the reason why I like historian cycles is for the same reason
it tells. It helps us know how we got here, what's going on, and where we're going in the future. So it's cool that you said that. Um. Now, the other thing that also catches my interest is, Um, you're talking about looking at the price of real estate relative to other things. I think that you're talking about, and
that's nothing I kind of pound. The table on is is to look at things in terms of purchasing power and not just us dollar term, right that what you're talking about, Yes, definitely to an extent, because you know, if you think about it, Mark, Um, people think housing is really expensive now because they measure it only in one thing, US dollars and no. But you know, for example, take this example someone saving for a house, right or you know, uh, and say they've been saving ten years
to buy a house and they're just a home buy or not an investor. Right, but they could be an investor either, right, Um, so they've been saving, Well, no one forced them to save their money denominated in US dollars, right, they could have easily converted as soon as they earned their dollars, they could have converted them to gold, rice, bitcoin, oil,
any one of a number of other things. And had they done that, they would feel the price of real estate is dramatically different than what they think of it as based in dollars. So it's really very interesting, and we're developing this whole new index around this whole concept of the question that I think is really life's most important question. I ask it all the time on my podcast and YouTube channel, and that question is compared to what that is life's most important question in my opinion.
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trading one thing for another. So I'm trading my dollars for the real estate or trading my dollars for that meal. But to your point, it could have been trading rice or oil for that that house with that meal. UM and and and uh. I I often throw these numbers out and I don't have the numbers. I just say hypothetically. But you know, let's say, you know, nine six the median home price was fifty dollars. Today it's now up
to like three. But back then it was so many ounces of gold, there's so many barrels of oil, and today it's about the same amount of ounces of gold and same amounts of barrels of oil. UM. But of course, I'm just kind of spitball on that, but I think you actually have some data that shows that we do. We do. We have a whole bunch of data on not just oil and gold, but a whole bunch of other things. So let's dive into it. Yeah, let's dive into it because I think, again it's something I pound
the table on the video that went live yesterday. Again I tell people start thinking about things in terms of purchasing power, not dollars, and and and just while you get ready, I know you're gonna show some slides. I'm excited to see them, but to set the stage a little bit um. You know, I've done quite a bit of a discussion on hyperinflation that's happened in other countries. And one thing that really just shocked me. I did this video on when when, uh how a currency dies?
And and I read this book called When Money Dies, and it talks about hyperinflation in Germany after the war. And what was interesting is um as the prices were going higher in their currency, everyone thought they were getting rich. My house has never been worth this much money, My goal has never been worth much money. I better sell my whatever asset now. While it's still high before it
drops back down. So they did, and so they sold all our assets for currency, which then ended up being worthless and they were it was they ended up burning it in the fireplace instead of would because it was
actually worth less than would. So anyway, it's super important to understand purchasing are So let's go ahead and jump in and yeah, and do you know, mark to your point, if if you go to Wikipedia and you type in Wimar Republic, Wimar Germany, right, you'll see that picture which you I'm sure you've seen of a woman basically loading the the currency, okay, the Deutsche marks into a furnace to extract heat from them because it was cheaper than trading the currency units for wood. I mean, you know,
it's it's just amazing, yeah, you know. And every fiat currency ever throughout history has gone to incenttrinsic value the paper it's printed on. So, uh, currency is only thirty five years and we're at fifty now, so we're we're we're living on borrowed time, to say the least. Well, this is a seminal moment in history because it is the fifth year anniversary of Nixon detaching the dollar from the gold standard. It's actually next month. So uh yeah,
truly truly amazing. So yeah, I'll share my screen and let's dive into this. I'm glad we're on the same page with that. And so you know, it's really all about the measuring stick. And like we were saying, people are using the dollar the major as the measuring stick, and that is a mistake. Uh. You know, no one cares about dollars. They only care what dollars can buy us, right. Uh. And you know, before I dive into this too deeply, I just want to reiterate something I've talked on your
show about before. There are really three types of real estate markets, linear, cyclical, and hybrid markets. They act differently. Uh. In this example today, just for the interest of time, we only are comparing to median home price. But just understand that if you were to drill down, things change whether you're in Los Angeles or Memphis, right, very different in the markets we buy properties. And so so I
just want you to know that. And the question is compared to what it happens with trading in the economy, it also happens in every other part of our life. You know, we are comparison be beings by nature. We look at our neighbor's house. We look at our neighbor's yard and say, hey, are they doing better than I am?
We look at their car. Uh. You know, when we were single, we look in the marketplace for a mate and we compare the Only reason you know, for example, that your wife, the woman you married, is more beautiful than another was by comparison. Right, That's that's the only way we know anything is by comparison. So life's most important question is compared to what to drill down on that question? Uh? For this example as we're talking today is Uh, let's talk about our friend George's question is
is it cheap or is it expensive? And so as we do that and we consider whether or not we're in a bubble, the index can give us the answer. The h C I, the Heartman comparison index can give us the answer. And um, it can also maybe we'll leave that up to the people listening and watching, will it? Will it tell us when the bubble will pop? Right? And so's the question I want to know the answer to, right, right, Well,
we're gonna explore that one for sure. And uh, and we need to understand that when we're thinking about this that a house or an apartment complex as investors, right, it's made up of commodities. And that's why I call this packaged commodities investing. So we're gonna look at ingredients steal lumber, copper, wire, petroleum products, etcetera. We just have to understand that a house is just a set of
commodities that are assembled in package. Um. So of course I've got that free book for all of your listeners at Pandemic Investing dot com. Or I've taken a lot of these principles and applied them to the times we're
living in, and that's at Pandemic Investing dot com. We talked before on your show about inflation induced debt destruction and it totally uh shows when you look at the index, because when you price things in real dollars and you compare say the consumer price Index with the Case Shiller Housing Index, you see that mostly it's parallel, but at times it gets really out of sync. And uh, that's just what happens. Uh. And we've had our our money
printer in chief, Jerome Powell, printing money like crazy. Um, it wouldn't before we dive into the index and the comparisons. We have to talk about a couple other indexes real quickly. One is the HPI, the house price index. I think it's very flawed and does not do as good a job as the index will talk about. Uh. And then of course the Case Shiller index also very flawed, because the twenty markets the Case Shiller Index profiles could really
lead someone to make big, big mistakes. Why do I say that, because fifteen of those twenty markets, two thirds of the mark are cyclical markets, and it just wouldn't be uh, it wouldn't be prudent for a real estate investor to decisions based on only those cyclical markets or
at least two thirds cyclical. UM. The big, big, the big problem that I have with with those those home price indexes and the Schiller index UM, and I've done videos on this as well, is that UM, they take into account the price of the home, but nobody pays the price of the home, right so wall um, we're back up the two thousand eight levels or maybe slightly above. Interest rates are half and so if you look at the month payment, I think it's you know, over of
first time buyers are financing the home financings. So it's always about the monthly payment. And so if you look at um the payment amount, because interest rates have dropped in hal since two thou eight, UM, it gives you a different picture. Do you take that into consideration? Absolutely, that's the second part of the index is payment. The first price part is price. And I couldn't agree with you more. Nobody buys a house based on the price. They only buy it based on the payment. So you're
absolutely right about that. UM. This index, the Housing Affordability Index, is actually my favorite outside of the new HCI index that we launched, because it does consider payment. It looks at median house payment versus media and income in a given area. It's major flaw, though, is it doesn't account for foreign money or retirees that buy properties for cash. Okay, so there are some flaws in that as well, and I think the UH the Comparison index really really gives
us the answer. So let's look at gold gold. Although I'm not a gold bug, and I don't think you are either. Although I'm not sure I've I've been a gold bug for a dozen years now. I consider myself a sound of money advocate. Yes, I love it, and I'm guessing bitcoin is your sound money. So we're gonna get to that one next. But but let's look at gold. I mean look gold, to be fair to it has been considered money for five thousand years. Humanity has considered gold to be money, and uh so it would be
completely unfair to not consider gold. So if you go back to nineteen seventy, nineteen seventy one year before we went off the gold standard, if you wanted to buy the Median Price House for twenty two thousand dollars I'm rounding off here obviously, and you had gold at thirty five dollars, it would cost six hundred and forty six ounces of gold to buy the Median Price house. Fast
forward to the year two thousand, a generation ago. Back then, twenty one years ago, to buy the Median Price House for a hundred and seventy three thousand dollars with gold at two hundred and eighty three dollars an ounce, it would take you six hundred and ten ounces of gold to buy the Median Price House. But guess what mark today, if you want to buy the Median Price House, it will only own only cost you a hundred and ninety four gold. So your briefcase full of gold has gotten
a lot lighter. Okay. Um, it's so measured in gold or priced in gold, is housing cheap or expensive? Cheep? It's got much very go on from six to two Yeah, yes, sixty six, yeah, yeah, you're right, and even compared to a generation ago or fifty one years ago, it's truly amazing that if you were saving your money in gold, your house has gotten a lot cheaper. Okay. So let's look at bitcoin, your favorite, right, and hey, I'm a fan too. I I hope bitcoin succeeds wildly. I would
love it. Uh, it doesn't go back far enough with bitcoin. But in two thousand ten is you know, that's where we start to buy the median price house at two hundred and twenty four thousand dollars take you seven hundred and seventy three is in bitcoin? Uh? A year ago, last year to buy the median price house at three hundred and fifty nine thousand dollars twelve bitcoin. And today even though bitcoin isn't that much higher because it's had some losses lately, Uh, the house price at three five Uh,
you're you're looking at thirty four thousand bitcoin? Okay, But dollar bitcoin dollar bitcoin, and it takes ten bitcoin. Okay, So priced in bitcoin, is housing cheaper expensive? Right? It's gotten from seven thousand two to ten a lot cheaper, A lot cheaper, Okay. The most important commodity on Earth, I would argue as oil. There is no commodity on Earth that is more important than oil. Forget about what
all the tree huggers say doesn't matter. The fact is, at the end of the day, the world is still running on all. Okay. In nineteen seventy oil was only three dollars a barrel three bucks. Today it's seventy five. Right. The median house price twenty three thousand dollars, give or take sixty seven hundred barrels of oil to trade that for a house. Okay, I'll jump to the year two thousand, sixty three hundred or rounded off sixty d barrels of oil to buy the median house. Today only forty hundred
barrels of oil will buy you the Median house. So priceton oil is housing cheaper expensive? Well, it's definitely gone from gotten cheaper about a about a third cheaper than it was in What's interesting is is I like to ask people this question which is, do you think, given all the advancements technology, that it's actually more work to bring oil to the marketplace? Uh like to try to to bring it out, to bring it to transport it package? Like, do you actually think it's more expensive or is it
less expensive? Right, it's gotten easier, it should have gotten I mean, has gotten easier and should have been cheaper. But but it's gone the other way. And and not only that, you know, what you mentioned is certainly true.
The technology of the actual you know, running of the plant, like we'll call it the heavy equipment that's better and cheaper, right, but also just the technology of the software that controls the inventory supply and manages that and manages this shipping and supply chain that's gotten so much better and so much more efficient, just radically efficient that um, yeah, it is cheaper. So that what that really shows is that the dollar is just losing value dramatically. Okay, So orange juice,
now this one is different. Okay, this one is different in orange joice priced and orange juice houses have become a lot more expensive. So what I recommend to all of our listeners is, uh, you know, just to go look at the chart n seventy it took you fifty one thousand pounds of orange juice to buy a house. Uh, two thousand, because I'm just skipping to you know, make in the interest of time, two hundred and ten thousand pounds of orange juice to buy a house today two
hundred and eighty thousand pounds to buy a house. Right, so priced in orange juice, houses have become expensive. So my recommendation is that everybody dilute their orange juice with champagne or vodka. Ok. Well, Also, what it does illustrates that what you use as your store of value and your unit of account matters. It does matter, absolutely matters, absolutely matters. So uh, I'll do rice and then we'll move on to the payment side of the equation, just too,
in the interest of time. So the reason I pick rice as a very important thing is, you know, rice is the food stock for two thirds of the world. Two thirds of humanity survives on rice. Yeah, they eat other things a little bit too, but rice is their staple. Okay, it's like the base food. And you did a great video by the way, recently on the Great Reset of Food.
I really want to recommend that to people. So uh, nineteen seventy, if you wanted to buy the median price house, it would take you uh, forty two thousand pounds of forty three thousand pounds of rice. Okay. Um, in two thousand it would be thirty one thousand. Today it's only twenty seven thousand, so priced in rice, housing is cheaper, okay. Would say, yeah, yeah, nice, Uh, you know what, Let's not move on too quickly. I want to do SMP. Okay.
This is important because the SMP the standard and pours. The SMP five hundred index accounts for seventy two percent of all consumers spending in the country. It's a pretty good measure for how the economy is doing. Um. You know, the SMP five hundred is a large part of the overall economy. So in nineteen seventy, it would cost you two hundred and forty three shares of the SMP index at ninety three dollars to buy the median price house two hundred and forty three shares to buy a house
in nineteen seventy. In two thousand, it would cost you a hundred and nineteen shares of the SMP to buy the median price house. But today it only costs you eighty shares of the SMP to buy the median price house. So priced in the SMP, housing is a lot cheaper than in median income. Not so cheap. Okay, uh uh you know how many years do you need to work to buy a house with cash? Right in nineteen seventy
you needed to work two point six years. In two thousand, four point one years, Today you have to work four point eight years if you were in the median income to buy a house. Now we're going to get to the payment part in a moment. It was in two thousand, Uh, in two thousand, four point one years. Yeah, four point one two point six, four point one four point eight Yeah, going from nineteen seventy to two thousand? What that? What
that tells you? The way that I look at that is, um, this is uh the reason why the money is losing values because they keep printing so much of it. And uh and this illustration right here took two and a half years of your life. That's your life. That the most scarce asset in history is your time. All other assets we can get more of if we lose it, but you can't get back your time. So it took two and a half years of your life that you can't get back. To buy that house today, it takes
almost five to double. And so what they're doing by the money printer is actually stealing your life. They're still your life absolutely. You know, listen to what Mark just said their folks that the only thing any of us really have is our time. That's it. And what Mark said is right on. You just nailed it, because they are literally by debasing the currency, they are also stealing the years of your life away. So that's why you listen to this show because you want to learn how
to how to turn that the other way. You want to learn how to not be affected or maybe even to thrive by aligning your interests with what I call the two most powerful entities that have ever existed in human history, governments and central banks. And that's what we're here to help you do. Okay, So so yeah, it's
a lot now. Now Forbes, Interestingly, Forbes magazine publishes in their own economic index, their own version mark of the c p I, the Consumer Price Index, but they call it the cost of living very well, so this is like the c p I for rich people. Okay. And and what's interesting about it is that we also took in the Hartman Comparison Index. In the h c I, we compared the cost of living very well index to
house prices, and here's what we found. In nine seventy it would take five hundred and eighty one shares of this index to buy the median price house. Today it only takes five hundred and six shares. So for wealthy people, houses have become cheaper, not two thirds cheaper like some of the people that held the gold or a bitcoin radically cheaper or whatever, oil, etcetera, but still cheaper. Okay, in the cost of living very well indexed UM. Now copper, Uh,
you're going to find some differences there. Copper is a super important commodity. They call it dr copper for a reason. Um four forty eight thousand pounds of copper to buy the house two thousand, two hundred and four thousand pounds and two thousand today only eight one tho pounds. So from two thousand today basically a generation twenty one years right, um, housing has is less than half the price in copper
than it was then. Okay, so so everything everything but o j yeah, yeah, orange juice, orange juice, definitely, yeah, not so not so good. Okay, So now let's talk about the payment. Okay, we we compare it to a whole bunch of other things. Find out more at my website Jason Hartman dot com or on my YouTube channel
or podcast, The Creating Weald Show. But payment, you you mentioned that earlier, and I want to get to payment because the index considers not only the price of the house, but also the typical mortgage payment, and with interest rates, like you said, mark being half of what they were. Uh, it's really staggering what happens to the payment. So let's look at the mortgage payment based in UM the median home price, adjusted for inflation, and then priced in bitcoin. Okay, staggering,
what's happened? So the media mortgage payment was a hundred and forty two bucks by two thousand, was today compared to two thousand, it's only eleven seventy. But when you adjusted for inflation back in was a hundred and forty two bucks today it's only one sixty nine. It's not that much more expensive adjusted for the official rate of inflation,
which is fake, which is manipulated. So basically, uh, if you put in the real rate of inflation, the house payment has become quite a bit cheaper than it was in nineteen seventy. Based in bitcoin, it's almost free to have a house payment, okay um based in gold though, um. To make your payment in gold in nineteen seventy it took four point one ounces. In two thousand, it took three and a half ounces of gold. Today it only takes point seven ounces of gold to pay your mortgage.
Um in barrels of oil. Nine seventy took forty two barrels of oil to pay the house payment. In two thousand thirty six barrels, and today only sixteen barrels a month to live in that house for your mortgage payment. Okay, orange juice, it's gotten a little more expensive. It's not
the most expensive. It was nine D forty four pounds of orange juice per month today, uh, three D nineteen in nineteen seventy, but in two thousand twelve hundred barrels or not barrels pounds, So it's a little cheaper than it was in two thousand. Yeah, it's worth yea. How
about shares of the SMP. Okay, if you want to pay your house payment, you could cash in one and a half shares of the SMP converted to dollars pay your mortgage in two thousand, if you did that, it would only take point seven less than half to pay your mortgage payment. Today it only takes point three. So priced in the SMP or mortgage payment is dramatically cheaper.
Dramatically cheaper in a bunch of things. Okay, how about hours worked at the average wage in nineteen seventy you you talk mark about stealing your time in forty one hours at the average wage to pay your mortgage in two thousand, it took sixty nine hours. Today it only takes forty six hours. So, you know, cheaper than it was twenty one years ago, a little more expensive than it was fifty one years ago. UM tuition, we do it indexed in tuition, college tuition, UM, a whole bunch
of other things. But the bottom line is, housing overall is cheaper in almost anything you compare it to today, both on a price of the house basis, but even more so on a monthly payment basis, is getting cheaper. And that's why I say we've got a few good years ahead of us probably in the housing market. Now. I do want to make the disclaimer that the index is a comparison index. It's called the Heartman comparison Index.
It compares things. It doesn't consider other things like foreclosure, moratoriums, in ventory levels, all of that stuff. But I will say, uh, a lot of data is in the price of things. The price of anything offers a ton of data. Rice price is data prices communicating the prices. This is the signal that communicates everything. And so um, that's of course that's what it is. Yeah. M curious though, because um, George George says, uh, you know, is is it expensive
or is it cheap? Um? But that doesn't tell everything, right, So, uh, just because homes maybe aren't as expensive on a monthly basis or comparatively as they were in the past doesn't necessarily mean that they won't cry in And just because or because they're lower doesn't mean they can keep going up either, right right, So right now, we're doing the index on a quarterly basis. We're putting in new numbers every quarter, okay, and we want to get it to
a monthly basis. But hey, this is a new thing, and we're staffing up there okay for the index. Uh and uh, and so you know, just keep following the index, and when when the index says housing is expensive compared to all these other things, then you know that is a dangerous point. And we will get there, especially if these dysfunctionally low interest rates continue, we will good to that point. So we're just not there yet. Hey, sorry
to interrupt this video just one more time. I'm not running Google ads, so it's actually way less interruption than I normally would have on a video. UM, and that's because it's sponsored by block five. UM. They are opening up the world of bitcoin and financial products offering to pay you interest on your bitcoin. UM better than own in a rental property that you have to manage and control and have the risks. You can just earn interest
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link to check them out. You can earn up to two fifty dollars in free bitcoin just for using that link. And that's it. Let's go ahead and get back to the interview. Yeah, so, um, it looks at the price things, and UM, I like that because it's most basic. Most people are like, oh, real estate, it's way too expensive. It's got a crash any moment um. So it gets a different perspective on the price. Like I said, I keep pounding the table on this. Purchasing power brings you
back to that, which so it's perfect for that. I was I was taking notes and writing down a bunch of those amounts because I'm gonna use some of that data. Um. But um, like I said, just because price is cheap doesn't mean it's gonna get going up. But just because it's expensive doesn't mean. Uh, we have the wild card, as I call it, These are the banksters, and we don't know what the banksters are gonna do. So for example, the FED and the government has done anything other power
to prop the market up. Um. You know, over the last year they've spent trillions of dollars to do that, and a lot of it has been done in the mortgage industry specifically, um, you know, buying mortgage backed securities and whatnot. And uh. And then even with the you know, rear rams and eviction moratorium, they're helping for payments. Um. So it seems like that's a big wild card and we don't know what in their head will they do? You will they nah? So how does that? How do
you factor that in? I am really glad you mentioned that what we are adding to the Heartman Comparison Index is a mortgage sensitivity component, a mortgage interest rate sensitivity component. Because it's a good question what would happen if they FED and the government and the banksters. Uh, you know, this collusion between these entities, which is so secretive and just ridiculous frankly. Uh, you know what would happen if
they tighten the money supply and and interest rates go up? Well, the ft doesn't directly control mortgage rates, but they certainly influence them in a huge way. And so you know if rates went up I say one percent, which is really a thirty three percent increase depending on the exact rate, very approximate there um. Uh, you know, then it would it would certainly make housing much less affordable. So you're
absolutely right. But when that happens, the likelihood is all of the other compared to what items in the h C I will also react to that, right, Certainly, the S and P will, gold prices will uh, copper prices, everything reacts, right. But here's the problem, and here's why it's so hard to make predictions right, And here's why so many people who claim to be good at making predictions fall on their sword at some point and right
is because these things don't act in lockstep. There's a lag time between these reactions of different items in the economy. And so, uh, you know what you can be pretty safe with, I think is looking at big macro trends, and that's that's what I like looking at, and I think it's where you like looking at too. Uh. If you're trying to make predictions and be a day trader, you're probably gonna get in trouble. Okay. So, um, I'm curious. Um, well,
I want to see I want to ask you. I want to nail you down as to what you see in the near and long term future. But before we jump into that, for everybody watching, make sure you stay to that because I'm gonna ask Jason. This is a causation. Um, As I was walking down the beach trail last night with my wife here in southern California. I mean homes have doubled. I mean they're up a hundred percent in in in a year and a half. I mean it's insanity.
Then we're having this conversation. So I want to nail you down ask you what you think about that. But before we do, I'd like to ask you about two other triggers that I'm looking at. Um. So one is, um, there's been big news. I did a video on this about black Rock and the hedge funds and Wall Street buying up single family homes. Now they are basically taking near free money from the money printer getting their buddies
at the FED. They're getting it for almost free, and they're buying up entire tracks of single family homes the bread and butter as US real estate, and and they're over pain by a large amount of money because they're looking at different numbers than we are. You can get free money and make two or three percent. Heck, they're fine with that's a little overpay um, and that's a big trend, and it doesn't continue to be slowing down. How does that piece fit into the narrative? I guess, um, Yeah,
it's a good question. I think it's bullish for real estate prices and bullish for real estate rents because these institute have more data than we do and they obviously are still doing what they do right and and because of that, I think I think it's bullish. So I mean meaning in the investment world, we'd call that the smart meaning where the dumb money. So then meaning if the smart money is putting their money there, then maybe we think about as well. Right, Yeah, I think it's
a good indicator. Yeah, I do, even though they're even though they're potentially over paying because their number metrics are way different than ours. Fair enough, that's a that's a very good point. Um, yeah, I think it's okay. And here's the thing. You know, a lot of people I got asked a question similar to yours just recently on another podcast I was doing, and um, you know, the at the end of the day, we have to remember, Um, the number of houses and the amount of housing demand
isn't changing that much. Right, There's still a shortage of about five point five million houses according to n a R National Association of Realtors that has a very big statistical uh you know research department and um, and so we still have that same shortage. It doesn't matter if their rental homes or for sale homes. The fact is we have people that need a place to live. Right,
That's what happens at the end of the day. Now, I do want to mention though, and this is a far out thing, so no one needs to worry about it today. But uh, you know, in thirty to forty years, this dynamic looks like it will change quite dramatically because the birth rate is declining. And um, the one thing that has to happen for all of this real estate investing to work is you have to have demand, you have to have people, you have to have population growth
or at least stable population. And uh, and so that's that's super important. And you have to not have a disruptive construction technology that supplies a lot more housing to the market. And so you know, I've done deep, deep research on my shows about three D printed homes, about manufactured homes, and none of these things. Forget about the
hyper earring, it's bs. It's simply not true. I've hired a consultant to look at it and all sorts of stuff, and um, none of these things are disrupting housing construction anytime soon. It's a low tech process, and it requires materials. Even if they're three D printed, it's still concrete, right, It's still materials. And uh, there are land use restrictions and all kinds of problems with buildings. So I'm not I'm not worried about too much supply anytime soon, and
I'm not worried about declining demand anytime soon. Okay, Um, now, um. On the new question I had was our good friend George Gammon has been talking quite a bit about what's going on the report market, and now the reverse repot market and without getting deep into that. Basically, the banks were running out of money back in and so the FED was giving them liquidity. Now it's verse repost, so the banks are putting money back to the Fed. Um. This seems to be a signal of a big problem.
The banks have all this money, they don't want to lend it out, um, and now they're putting it back to the Then on top of that, I want to dive super and deep into that. But yesterday big news came across the news world of Wells Fargo wanting to shut down lines of credit, lines of credit, equity, lines of credit. Um, what do you think about that? Is
that like a warning sign? Because after the two thou eight crash, everybody's credit lines got pulled right, it was it was it was it was too I mean, the liquidity dried up, it was too risky for them to lend money. And now it's almost as if they're pre emptively doing What do you think, Well, I think that's a bearers sign. A credit contraction will definitely uh cause demand to level off as the FED tapers, which some argue they're about to do, and some argue that it's
gonna be a couple of years. I don't know. Nobody really knows for sure except your own power. Um. Even that he doesn't probably. You know, real estate is a credit based asset class. If you constrict the supply of credit, uh, you're going to constrict the affordability. But remember something, Um, that doesn't reduce the population and it doesn't increase the supply. So if people can't buy houses, they'll rent them. They will be forced to rent them. Right, there's only two choices,
all three I rent or be homeless. Right. Uh, so that options in to um. But you know, between that between drying up a little bit of the credit like with Wells Fargo, that's maybe a canary in the coal mine maybe. Uh. And then we've seen interest rates start picking back up again from their lows as well. So uh, the interest rates tick up and the lack of credit both do the same thing, which is make it more
expensive at home. The monthly payment goes up. Um. And if the monthly pay that goes up, does that bring the price of the home back down? Well, here's what really happens. Yes, it does put downward pressure on prices, but what people really um, it's just weird to me, Mark, and I've you know, over the last twenty years of having discussions about this exact thing. People will say, well, you know, if incomes are stagnant and prices are rising, um, how are tenants going to be able to afford to
rent my house from me? Or you know, if the economy is bad, unemployments high, whatever, right, whatever happens, The point is what gives in the equation mostly is the
standard of living. People are forced to move down or not move up in the first place, right, So uh, you know, if if you talk to one of your tenants today and then you talk to that same tenant five years from now, if if these things happen, right, they all say things like, well, you know, we used to live in a square foot house in a better neighborhood and now we live in a twelve hundred square foot house in an inferior neighborhood with worst schools. That
what gives is the standard of living. But economists don't follow this very well. They follow oh, yeah, the rate of inflation through the highly manipulated bogus CPI, the consumer price in next, sure, but they don't follow people, right, and they don't say this exact couple that had this life five years ago has this life today, right, They
don't do that, I mean not very much. Ats not in any real and that's ah, that's such an important point that you hit on because again as real estate investors, we talked to as I mentioned about the Bread and Butter, right, So that's an entry level three bedroom to bath home. And the reason why we've always liked those, at least speaking for myself, is because to your point, it's the entry level that people come to and if people fall down, they're gonna fall down to that level. And also people
coming up are to that level. And so that's why the entry level is great because you catch them either way moving down the economic ladder and others moving up. But that's exactly where black Rock and the and the Wall Street hedge funds are targeting. Is entry level three bedroom, two bass as well. Sure, but it's also where all of our investors target as well, and where you target
so you know we all do that. But but I guess just just reinforcing the point of maybe it's a bullet signal, right, they know what they're doing kind of thing, right, um, because I think you know one thing and again, so much of this is unknown because these banksters, you know, we don't know what's in their head. But um, I tend to think that they didn't just create eight trillion dollars in the last four months to stop now, right, Like they're not going to just do that just to
stop now? Why would they not keep it going? You're absolutely right, look at the you know, it's amazing to me, Mark, And I'm sure you have the same thought I do. Right, every time the G seven meets or the G twenty meets, you know, the big industrialized countries, right, every time there's a meeting in Jackson Hole, Wyoming where the FED has their annual meeting, or or they go to Davos, Switzerland,
and you know, the the creepy World Economic Forum. Right, basically, they're only answer, they can call it whatever they want. They've got all these complicated names, but they're only answer to any of these problems is create more currency units, print money. It's it, that's it. That's all they got. Okay. Yeah, they've got these little things and dials they turn and but that's basically at the end of the day, it's
all just money printing, okay. And they're not going to stop because no politician or FED chair or central bank chair of any other central bank, the European Central Bank, Bank of Japan, whatever, they don't want to make people take the tough medicine during their tenure. The only guy that ever did that was the late Paul Vulker, who was FED share in the early eighties. Uh. He he did do that. He tightened the money supply, interest rates went up through the roof. The economy just stalled like
a car crashing into a wall. And it was tough, but it broke the back of inflation. And I say, there is no way that's happening in today's world. People are just too wimpy. They're not willing to do it.
It's never gonna happen. So then um so then looking into the future, so then it's like, um, if the FED stops, which as we discussed, is probably unlikely, but if the FED were to stop with their intervention buying mortgage backed securities, propping up banks, etcetera, then um, potentially we could see the real estate market turn around and crash. From here, however, if they continue down the path they've been going down, to your point, when the whole world
looks like a hammer or a nail. Or when all you have is a hammer, the whole world looks like a nail. Um, and so UM, if they go till they blow, which is kind of what I'm thinking, we could potentially see things go way higher and further than we might imagine. I think you're right. So if I was thinking about buying a peace real estate in the United States, UM, I would first divide it into two
buckets as an investor or as a homeowner. But let's say UM, as an investor, I think the only strategy really makes sense is to trying to buy it for cash flow. Unfortunately, the amount of cash flow that you can get today has gotten greatly, partly because of Black Rock and Wall Street jumping in there working on rays within margins. But let's let's look at it from a homeowner perspective. As I said, this is the conversation I was having last night. I mean, I'm not kidding, man.
Here in southern California, prices are up like a hundred percent in like a year and a half or two years. It's insane. One point eight million dollar homes are not going for three and a half million dollars, like just like that Um, so is it is? It? Is it the top? I mean, would you buy at double the price? Or would you wait a couple of years and wait for those prices to come back down? Um? Or are they going to go till they blow? How do you
think through something like that? And I know different markets are different circle um, you know there, etcetera. But how would somebody think through that when they're when they're thinking about buying a house for themselves as a family, but prices seem to be sky high? Do you wait or
do you buy? And how do you evaluate that? I think in the cyclical markets, meaning the West coast of the United States, the expense of Northeastern markets South Florida where I live right the if you're in an expensive market, I think there's a much greater risk uh two, possibly things going the other way. But if you're buying in a cheap market where the housing prices are relatively low,
it's a linear market. You know. If you go to Jason Hartman dot com and click on the property's page on my website, you'll see properties that are in these good, solid linear markets. The insurance arc that people have against downturns that that and you know, think about this. When you have insurance, you don't worry as much. You don't care as much because you're insured. And the insurance people have is the linear markets offer good cash flow, and
cash flow is very reliable. Appreciation is not very reliable. It's very speculative. So if you buy a property, you know one of my ten commandments of successful investing is thou shalt not gamble. It's commandment number five. And that means that the property must make sense the day you buy it, or you don't buy it. You make your money when you yeah, And I don't mean you're buying like under market and finding that deal that nobody can
really find in real life. Right, I mean, the property has good cash flow characteristics, and if you do that, that's your insurance policy. If the value goes to own, who cares. I mean, on my website you'll see properties that have projected returns of annually all in right, that's not cash on cash, it's all the ways you earn returns on a property, and there are many ways. It's a multidimensional asset class. Great video on my website, thirty two minutes long, that can teach you how to analyze
the real estate deal. It's been watched zillions of times, and it really it really teaches you how to analyze the deal so you won't get hurt on a deal. And and and then, and that's what people have to have to do. You know, if you're buying in a
cyclical market, you are speculating, so be careful. But as as an investor, definitely be careful because if your property is worth half as much now, uh, you know in California specifically back to California, I mean we saw the worst real estate crash in history was like eight n ninety two, and it dropped about during those four years, but then in two thousand and eight it dropped sixty cent in twelve months. So uh, we've got a different taste of what might be possible. And I know what
happened in Florida as well. Um, but I would say so if you're an investor in the property drops like, you're screwed. I mean, you're stuck. And I and I if you have good cash flow, because you're not forced to not not if you have good cash flow, Correctum, which is why I said I think for investing in real estate, cash flow is the only option today. Um, the strategy. But if I was buying a home, I think about it like, is this a place that I
want to live forever? And if I can lock in these historically low rates and I'm happy with the payment, and if the problem if the value of the property dropped in half but I still got to live there and I still have a good payment, then why not? Right? And so I kind of think about that. But but if I was gonna buy for two or three years and then hopefully move up, well maybe that's not the
best decision. What do you think the way people lose money on real estate most of the time is they are forced to sell a property at an undesirable time. That happened to me, okay, So yeah, and and what forces them to property that never made sense, that doesn't have cash flow, that won't cover its cost, and hopefully generate positive cash flow or a divorce those two things, okay? Um? And and if you're not forced into that, you're probably gonna be okay because you just can wait and and
earn that that return every single year. Yeah. Now, last question I want to ask before we start wrapping this up, is um, you've just given us as the index that the Jason Hartman index, which I think, I think it's really Heartman comparison and hi Heartman compar um. So you know, we looked at real estate's cheap compared to gold, bitcoin, barrels of oil, um, pounds of rice, not O J but s and G etcetera. Now, many people think that real estate is the best investment um and it's a
way to build wealth. But per the h c I, it actually looks like it hasn't been that best in sment. It actually looks like I should have probably just put my money into the SMP uh or you know, oil, gold, bitcoin, etcetera. That's a that's an interesting question. But what I didn't say is that those other things don't produce income, and they don't produce tax benefits, so the income property and they don't give you inflation induced debt destruction, So the
income property is the best investment. But yes, you are right, that's very good of you to point that out that just on the straight price right uh, you know, buying the house in gold versus versus the house, right, Um, it's gotten cheaper. Good point. But also in addition to the things that you said, so the tax benefits cannot
be understated. I mean that's a big deal because, like you said, some of those properties all in cash on cash, they could be three or four percent, but all in it could be and the gold doesn't give you any yield every year, and the collector rate when you sell it where we need no tax, Yeah, we need cash flow to live on. And so that's why it's super important. The other thing though, that we that you didn't didn't
call out, but it's the leverage. And so I can put ten percent down and control the whole price of the house. I can't put ten percent down on gold, bitpoin or oil and control that whole asset exactly. Yeah. Then and then by being able to by being able to control a much bigger asset. Two, But I get the twenty dollars of appreciation to twe I'm sorry, the two appreciation, two of tax right up, even though I'm
only controlling it with twenty my own money exactly. So your return on investment in that example is one hundred percent. You've doubled your money with very little money. So yeah, you know, I I liken it to this. Remember when, um, when you were a kid and you discovered that your shadow was really big, right, Like the sun was at your back and you looked forward and you saw your shadow along the sidewalk was nine ft right and and
and you thought that's kind of cool. Well that's really what income property allows you to do through leverage is you can control, as you said, a much larger asset with much less so your risk is lower and your
ability to generate wealth from that is magnified dramatically. Yeah. Yeah, I was just spent the spent spent some time out in Arizona hanging out with Robert Kiyosaki, and he kept pounding into my head, uh, you know, controlling the asset, um, but also not putting your own money into the asset, even controling asset you don't even have your own money into.
So so real estate offers all types of opportunities. We won't get into that we don't have time, but offers all types of opportunities um that that they can't be overstated. But man, Jason, that was some amazing stuff. I really appreciate that. That index, Like I said, it's I I say stuff like that off the top of my head, but I don't have the actual data, the actual numbers. Yeah, now you intuitively know this right, Yeah, yeah, into really, so I'm gonna do that. Um, so we're gonna that's
that's Is that available on your website? Should we link to that? You know it's not. And the reason I haven't done it yet is we're producing a white paper right now and we're gonna have a whole book on the index. So we're gonna have a ton of material. Just get on my mailing list, uh, you know, through Jason Hartman dot com or if you want that free mini book, go to Pandemic Investing dot com and uh,
and we'll get that out there. But you know, we're we're still tweaking some things, so we didn't want to publish anything quite yet, got it, So will link to that and then where else do people follow you? Um, just Jason Hartman dot com or you know the book at Pandemic Investing dot com. Is good, you got it. We're gonna make sure we linked to both of those. And I know, I'm sorry Mark YouTube or podcast you know of course, yeah, yeah, which they'll find on your website. Yep, yep, awesome.
Well we're gonna ahead and sign off. Jason, Thanks so much for sharing that today. Good stuff. Happy investing to you and everybody listening. Thanks Mark,