Jason Hartman brings on guest Brian Beaulieu, author of Prosperity in the Age of Decline and CEO of ITR Economics. They talk about what is really going on in our economy right now. They believe it is not as doom and gloom as some people have made it out to be. Brian discusses indicators we should all be paying attention to and what’s coming up in 2020.
Jason Hartman 0:00
thought the event was amazing. I thought that I knew a lot about real estate. But coming to your summer, I realized there’s a lot of things that I don’t know. And one thing that you did besides teach me a lot about real estate is you inspired me to look beyond where I live and to, you know, kind of shrink down the world and make it smaller so that I can invest some places that are further away and get better returns. So I really appreciate that. And I’m excited to be here this weekend. And, again, for me, and from all the people I heard their thanks for doing these events because they’re great.
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 w 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 1:24
Welcome to Episode 1324 1324. Thanks for joining me today. It is a rainy Wednesday in Florida. And well it was beautiful this morning. But boy that ranges comes down. There’s no water shortage in Florida. Let me tell you that. It’s this is one wet place with life everywhere life is everywhere. So the quote for the day comes from Albert Einstein. I saw this one yesterday and I liked it thought I’d share it with you and you know if You ever watched that Simon Sinek video about why? You know, I think a lot about my why, you know, 14 years ago now, about 14 years ago, I guess it was, I could have retired, stopped working, I’d be relaxing somewhere with no sense of purpose in life. But I decided I had a why and my why was to save the world from the scam artists and the pooled money investments and Wall Street and so forth, and really engage in consumer advocacy. That’s what I love helping the underdog. And so this quote reminded me of that, and I thought I’d share it with you. Einstein said, quote, the world will not be destroyed by those who do evil, but by those who watched them without doing anything, unquote. That was good old Albert Einstein and he was a pretty smart guy, the world will not be destroyed by those who do evil and there are definitely evildoers folks, we all know that, but by those who watch them without doing anything, and hey, that’s the basis for like that funny Seinfeld episode about the Good Samaritan law. You know, the law in some places, I don’t know if these are these are still true if these laws are still in effect requires that we be a good samaritan if we see someone getting mugged, right? And we’re there and we can aid them. And we refuse to do it if we sit there passively. But with white collar crime, there’s no rule about that is there right. We have a duty folks to do things, to be activists to file complaints, to hold people accountable, and not accept this kind of bad behavior out there in the world. So I encourage you, in fact, I deputize all of you to do the same to do the same and we’ve helped many of you do that. And many of you have achieved some incredible results with that. So if you need help with anything, our investment counselors are here to help you, we have a whole team dedicated. And you know, I’ve noticed over the years, as I’ve hired people, and as I’ve let people go, and as people have come and gone from my companies, the people who don’t view it as a mission, who don’t have a sense of purpose, who don’t have a sense of ethics, who aren’t there to really do things well, and to go to bat for clients, who just want to make the next dollar, make the next sale, you know, those kind of people, you just got to show them the door. And boy, we’ve done that and it’s been costly. Let me tell you, because the instant gratification mind says hey, this person is producing, they’re making me money, you know, but really, when you play the long game, you look at the big thing. That’s the way you gotta look at it. And I think that that’s the best investment See, being willing to delay gratification for a long term bigger picture is really the best life and the best thing. So the National Association of Realtors is having a meeting or they just ended their big conference. And something big came out of it. Let me tell you, this is a big deal, big deal, big deal. This is going to change the real estate world, it’s going to change the market. And you know, there are arguments on both sides of this, whether it’s good or not. But there’s a thing in the business that I’ve been hearing about for the last 30 plus years in my career in the real estate business, and it’s known as the pocket listing the pocket listing. What is a pocket listing? Well, you know, there are listings on houses listings on commercial properties, but there aren’t many pockets listed for sale.
Jason Hartman 5:55
Well pocket listing is when someone who is a realtor and a realtor is actually a trade name. It means you’re a member of the National Association of Realtors. I was a member of the National Association of Realtors for many years. Now I am simply a lowly real estate licensee because I’m no longer a member of NAR, the National Association of Realtors. I have a real estate license, but I’m not a member of their association anymore. But you know, they do some good things, some bad things. I kind of think this is a good thing that they did. I don’t know there’s arguments on both sides. I can see it from both directions. But what they did is they have now banned they have banned pocket listings. And what does that mean? That means when some realtor out there takes a listing on a property and they keep it in their back pocket. They don’t tell anybody about it. They don’t put it in the multiple listing service or the MLS. They say hey, I’m gonna keep this One to myself, I’m not going to share it. And this only becomes a big deal in the type of real estate market where inventory is very tight, very constricted. Okay. And that, hey, that’s the type of market we’ve been in for many years now, right? Because inventory is tight, and there aren’t many listings out there, and there aren’t many properties for sale. So all of these selfish folks, they’re greedy. They want to go take a listing, and sometimes they don’t even tell the seller they don’t even tell the owner, that they’re going to keep it in their back pocket and not tell anybody they’re going to try and sell it themselves and double ended and earn twice the commission. Well, the National Association of Realtors says Look, if you’re a member of our association, which by the way is like most real estate agents are members, right? Traditional real estate agents. They have over a million members so they’re huge NAR big deal, big trade organization. They said look, if you’re a member of our association and you’re getting all the benefits from our association, then you have a duty of clear cooperation. Those are the words they use, quote, clear cooperation, unquote. That’s the policy they passed. And that’s what they think should happen. Now there are about 800 I couldn’t believe this myself. There are about 800 Multiple Listing services in the United States. The policy was going to go into effect January 1, but they decided to wait until May 1 to make it go into effect. All of these realtors the realtors out there the realtors, that’s a joke real estate. My funny term See, I’m so funny. Don’t you think I’m funny? No, I’m not very funny. Okay. I gave up my comedy career for this. Okay. Anyway, you’re probably glad I did. Or at least I’m glad because I’d be starving. Anyway, they said, Look, you got to cooperate by May 1 of next year, folks. So there’s the deal that will have significant impact on the market. And we will talk about it on future episodes what it means to you, the home seller, the home buyer, whoever you are out there. This is kind of meaningful. It’s kind of a big deal. All right. Next thing up. Well, I wanted to talk about leveraged buyouts. I’m going to save that till maybe tomorrow or maybe next week, because the LBO, the leveraged buyout now that, you know that’s something you hear about on Wall Street and the stock market. There’s a big one going through probably the biggest one in history. What does that have to do with real estate investing everything? Because I have long said that what we do as real estate investors is we do lbos we do leveraged buyouts, that’s pretty much how we buy our properties. I’m going to explain, I’ll explain it’s coming up. Don’t worry. I won’t leave you hanging too long. Either tomorrow or or next week. I’ll talk to you In Depth, because I need a little more time. And we got to get to our guest today. And our guests, by the way, is talking about prosperity in the age of decline, kind of contradictory concepts, right. So we’ll get to our guests in a moment. But first, I want to share with you a testimonial I got not too long ago, maybe a week, maybe two weeks ago, from one of our listeners. Now this listener is kind of a special listener. And at first I thought she was upset with me. But as I kept listening to the message, I realized she was not upset with me. She was actually leaving a nice compliment. But at first, you know, when someone tells you when they say something like, we need to talk, or I got to tell you something, you think, Oh, I’m in trouble. Well, not in trouble here. You might think this person’s kind of bias, but just listen to what she says for a second. Then I want to talk to you about live recordings coming up live recordings that we have coming up of some of our conferences. I think you’ll like this. If you attended, it’ll be a recap. If you didn’t attend, hey, you get some free stuff almost as good as being there. Okay, so here we go with a little quick clip, and then we will get to our live stuff in our guest,
Brian Beaulieu 11:24
Jason. So I have to tell you something. But I need you to forget, I am your girlfriend because this is coming from another place. This is not from the person that knows you. This is from just a random person in the world. I think your podcast is the most entertaining, educational and engaging of all the podcasts. I know. I don’t know them all, but I’ve tried many and I either lose interest or my brain or my mind starts wandering Just kind of just follow them. And with your podcast, just keep listening and learning and I just get entertained. So just wanted you to know that. And trust me, this is not coming from the girlfriend, person, this is coming from an objective person that knows podcast at least.
Brian Beaulieu 12:24
That’s my opinion.
Jason Hartman 12:25
Okay, I’m not gonna let you hear the rest of it. But yes, that’s Carmen with her Venezuelan accent. You’ve heard her on the show many times. I just thought that was cool. And you know what? I think she’s right. I think she’s onto something. My podcast is the best podcast out there. So keep on listening, folks, and we’ll keep on producing them. So what was I talking about about live stuff? Well, we have got some good recordings to share from our recent profits in paradise event, and we’ve got some good recordings of some of our other events. By popular demand, we’re going to be playing some of those vignettes for you, we have some really interesting conversations that a lot of these events, and a lot of stuff we don’t talk about on the podcast. And over the past years, the past 14 years, you know, we’ve played some live events stuff, but we just haven’t done much of it lately. And you’ve asked for it. So we’re going to do it. You’re going to hear some of it, of course, though, to the event, because there’s so much more than just hearing the content. When you go, there’s all the networking, all the fun, all the drinks, the bands, you know, we hire tribute bands, and all kinds of stuff. And by the way, we’re going to be announcing our spring meet the Masters conference, it might technically be in the winner toward the end of winter. But that’ll be coming up in Southern California soon. So look for an announcement on that. And without further ado, let’s get to our guest today and talk about prosperity in Egypt. It’s my pleasure. Welcome a returning guests back to the show. That is Brian volio. He is CEO at ITR, economics and author of prosperity in the age of decline, how to lead your business and preserve your wealth through the coming business cycles. Brian, welcome back. How you doing?
Brian Beaulieu 14:16
I’m doing well. Jason, thanks for having me back.
Jason Hartman 14:18
It’s good to have you on. There’s a lot going on in the economy. There’s a lot going on with the Fed and interest rate discussions. Where shall we start?
Brian Beaulieu 14:30
Let’s start with looking into the future here a little bit. As you and I are talking this lot of consternation about the economy of softening up here in the waning months of 2019. And everybody seems to be getting caught up in that and I think that’s mistake. What’s really more important to look at is look up six months a year beyond this. You have to be thinking a half business cycle ahead if you’re going to get a competitive edge going for yourself. We’re not Caught up in a weakness because we saw that coming a year ago. What’s important now is looking for the leading indicators that are telling us about the next rising trend, they’re beginning to form already into reversals, we follow over a dozen leading indicators. And three of them already have turned up into statistically significant rising trends. So it’s time to look at that next trend and be able to zero in on those opportunities that arise from the next trend rather than worrying about the Fed to lower interest rates. Another 25 pips, that’s ancient history by now. And if you have position for it, you’re not going to be I’d rather you get position for the next global business cycle expansion where interest rates are going to be moving the other way.
Jason Hartman 15:46
Tell us about that next cycle, and then let’s talk about how to position for it.
Brian Beaulieu 15:49
The next cycle is going to be the up phase of new business cycle we’re concluding the current business cycle and its global as most people are aware of And we expect that the next rising trend will also be global. It’s not going to be particularly strong, but it will be markedly better than what we’ve been going through for the last six months. And we’re going to be going through for the next six months, this deceleration is going to turn around into acceleration. So we fully expect that in the second half of 2020 will be on the upside of another cycle that will carry us all the way through 2021. And that timing is what we’re getting off some of the preliminary reversals from the leading indicator
Jason Hartman 16:37
sounds like you’re pretty optimistic about things.
Brian Beaulieu 16:41
You can call it optimism we call it realism. I mean, things aren’t good or bad, optimistic or pessimistic. We just read the trends and look at what’s going on and just realism is all it is. But yeah, you can call it up if you want. Yeah,
Jason Hartman 16:53
it seems like which, you know, a lot of people are predicting, you know that the cycle is ending and It’s time for a recession. So we’re hearing you know, that kind of talk a lot. And that’s why I mentioned it. Tell us about some of the indicators that you really value in terms of forecasting future trends.
Brian Beaulieu 17:14
Okay, there’s not going to be as neaten bow ties and answers you may like because some of our best leading indicators are proprietary to IPR economics. We’ve developed them to be very, very good long term leading indicators by long term I mean, 12 to 18 months visibility into the future. And, you know, we’ve created them, we’ve honed them we and they work exceedingly well for us. One, which we’re showing a lot in our presentations is a retail sales leading indicator that leads by 18 months. So there’s no doubt in our minds that the retail sales sector is going to be seeing diminishing growth between now and the end of 2019 and probably the first quarter of 2020. That’s pretty much back on play at this point. The leading indicators suggesting that retail sales are going to slow down to about a 2.8% growth rate at their trough this lowest point. And that’s enough to keep us out of recession. But it really puts us on the hairy edge of recession. It’s an app that the Federal Reserve will probably have the latitude to lower interest rates one more time if they want to. I don’t think that’s going to rock anybody’s boat when we’re the other than the global marketplace has been advertising that is going to happen for quite some time. These leading indicators like the eyecare retail sales lady indicated the ITR financial leading indicator, and a few others are telling us interest rates, business activity, retail sales, activity, wages, all again being a brand new rising trend beginning in the second half of 2020. I think if your readers want one to follow that or your listeners rather, I want one to follow that they may not be already tuned into. I suggested g7 leading indicators put up by the OECD in Paris, we run a rate of change on that. But that’s a an offbeat one for most people, and it’s a good one. And another one that we find very useful and most people don’t follow and it’s readily available is copper prices. Copper is the metal with PhD in economics, so use it, and it tells you what to expect.
Jason Hartman 19:24
That’s interesting. And I do talk about copper a bit. This is a very interesting expression. I’ve never copper is the metal with a PhD in economics.
Brian Beaulieu 19:34
Tell us more about that. I love it. But it’s just such a ubiquitous commodity. And it just happens to be a bellwether commodity, that when the pricing is going up, you know where industrial demand is heading, barring some other extraneous event, and when it’s going down, it tells you where industrial demand is going on the downside. And it has been in the 35 years that I’ve been doing this one of these cycle end and cycle out in the characters that I can count on. Yeah. Interesting, interesting, good stuff.
Jason Hartman 20:04
So interestingly, there has been a lot of pressure from the Trump administration or specifically Trump’s Twitter account to to see some lower interest rates, even negative interest rates. What do you think about that?
Brian Beaulieu 20:19
I think that we’ve seen presidents in the past harangue Federal Reserve’s for lower interest rates. This is nothing new. Never Actually, I don’t recall any president ever haranguing for negative interest rates. That’s that’s sort of extreme, but that’s sort of par for the course, practically as you go into an election year presidents like lower interest rates, they don’t like higher interest rates. I think the Federal Reserve needs to be independent of the body politic. And I think Chairman Paul has been doing a good job stating that if required, they will lower interest rates. He’s just following the marketplace lead and doing a pretty good job of Running out the president. It’s not beyond most people’s understanding that lower interest rates also helps a real estate investor more than your average person out there. And our president is a real estate investor. So he needs those lower interest rates for two very good reasons.
Jason Hartman 21:18
Yeah, I’d like to say that Trump is our first real estate president, if you will. Yeah, very interesting. Very interesting. Well, what else do you want people to know? I know we’ve gotta wrap this interview up kind of in short order. But maybe any any things I haven’t asked you about? I want to ask you about trade Warren labor to before you go but
Brian Beaulieu 21:40
go ahead. There are real estate centric point that we’ve been making with people is you look at the demographics of the United States. And you look at the historical occupancy rating, if you will, for homeownership were way below norms. We had ITR economics think that the housing industry is going to be a very strong part of our economy through the end of the 2020s. That doesn’t mean it won’t have some ups and downs cycles are always going to happen. But the the underlying trend, the secular trend is going to be quite positive for the housing industry, both in terms of volume and terms of builders and terms are realtors in terms of lumber yards. I mean, it’s going to be a good part of our economy. We’ve taken a bit of a hit for various and sundry reasons, but it’s catching his breath. And I think you’re going to be enjoying the rise that’s about to happen.
Jason Hartman 22:35
Very interesting, very interesting perspective. So talk to us a little bit about trade, if you will, and, you know, this constant talk of the trade war and I think the media has portrayed that really in a very lopsided fashion. You know, not talking about the good that comes out of it in terms of American jobs. You know, we’ve seen pay increases now you You’re welcome to disagree. With me, but, you know, I think there are definitely some good benefits for all you Here are the bad things, you know, double edged sword.
Brian Beaulieu 23:06
Well, Jason, then there’s no doubt that there are winners in any terror for protectionist situation. But in terms of wage increases they were going on before the terrorists were ever imposed that just weren’t getting a whole lot of press. In terms of jobs being created, we’re actually seeing a slowdown in the rate of rise and jobs. This is one of the peculiarities of this whole trade issue. we impose terrorists at the top of a business cycle. Traditionally, you impose tariffs or other forms of protection to stimulate us job, quote, unquote, creation, and to protect local industries, US industries because they can’t compete on the global sphere. And that was initially there. The rationale and what had me a funnel from the very beginning is for trying to stimulate employment where we go Get the people, we don’t have a supply of labor to satisfy the demand. The only reason we haven’t seen more for a price increase in wages which would hurt profitability is businesses have been making herculean efforts in the form of automation. And really obviating the utility of labor in any of their businesses, as many as their business processes as possible. Long Run, and I’m a macro economist Jason long run, care of protectionism, decrease competition, decrease competition leads to inefficiencies, inefficiencies leads to inflation, structural imbalances, but then the economy and ultimately somebody has to pay that price. And whether you’re talking about the the Jones Act, and shipping in the United States, and what that costs means, sure, we created more welding jobs, we created more machinists jobs, but somebody had to pay for those in Consumer ended up paying big time for all of that. So there are winners and there always loses my friend.
Jason Hartman 25:06
Yeah, I agree with you. It is a it is a very hard balance, but it just feels like most consumer prices. And I’m really referring to things. They’re imported from, of course, mainly China. Her incredibly cheap. I just can’t believe sometimes how inexpensive and what good quality we get to enjoy today. You know, it’s the opposite of inflation. I mean, I remember in the 90s how much more everything costs than it does today. Everything today is so much better and so inexpensive. You know, I sort of wonder, do we really need prices this low. Now, that doesn’t apply to everything food to college tuition, healthcare, completely overpriced assets. If you want to buy house very expensive but consumer product are just cheap. You know, I think it might be better to have a high paying job or a job at all, you know?
Brian Beaulieu 26:07
Well, in terms of the cheapness of consumer products, that increases the standard of living in the consumer circuit. Now you can afford the phone you can afford the TV multiple TVs. The opposite is you decrease the standard of living of the consumer. So if you’re going to start making things more expensive, then their level of utility for all these consumer goods is going to be diminished because you’re not going to have as many of these consumer goods because you cannot afford them anymore. Yeah. Make no mistake about a globalization whether you and I like it or not, is under severe, negative pressure. You look at Brexit, you look at Italy, Austria, China, Brazil and the United States. nationalism, my friend is the new trend now, right not globalization. So be careful what you wish for because nationalism is going to get you the future that you just miss spouse then there will be winners and losers in the in that scenario. there always are.
Jason Hartman 27:03
Yeah, no, there’s no question about it. It’s just that we until recently, I haven’t seen a real pay increase for Americans in decades.
Brian Beaulieu 27:13
Now. I can agree with you there. I’ve got to tell you that shows otherwise, Jason, tell me government data that shows and whenever I do a talk, I just did one yesterday in Milwaukee. So I showed them how in Wisconsin, real wages have indeed gone up after adjusting for inflation. People are making more money today than they were 10 years ago than they were 20 years ago. You know, the politicians love to throw it up the numbers to prove to prove whatever
Jason Hartman 27:39
point they want to make. Yeah,
Brian Beaulieu 27:40
right. Right. And I and I just deal with the facts, man, I just look at the numbers. The numbers say, real people making more money than ever before this system. Our form of capitalism isn’t perfect. But gosh, it really works and it’s already good. Really
Jason Hartman 27:55
well, no question about it. I agree with you there. By the way, what time period are you talking? Because I have heard and I’ve heard so many studies have read so many articles showing that like 1977 was sort of the, the mark, and up until just 2016, give or take, no real dollar pay increases. Now, of course, you got to segment that geographically by income. Yeah, I get it. It’s complicated. I know. But just tell us a little more about your numbers. And let’s wrap it up with that
Brian Beaulieu 28:26
I specified by time periods, 10 years in 20 years, going back to 77 goes back to our prior generation, we had a lot more inflation than so you’re looking at some significantly inflated wages during that period. And there’s been some really good studies that said, You don’t look just at wages and back we have a chapter coming out in our next book about this. You have to look at the standard of living and it goes back to your earlier point, Jason, we have more things available to us. We enjoy more aspects of all these things. We have more free time. Our standard of living is so much higher today than it was in 1977 or 1987. For that matter, I don’t want to go back to those times whatsoever. I don’t want America to go back to those times either give out your website, Brian and tell people where they can find your book too. You can find the book on the website prosperity and the age of decline. And the website is I key our economics calm. And you’ll find us there.
Jason Hartman 29:26
Yeah, good stuff. One last question before you go, just interesting prosperity in the age of decline. You sound very optimistic in this interview. And now I know you’re saying just realistic, but you know, you said some very positive things. Is the decline something that’s out further in the future? Or is it a catchy title or just explain that title a little bit if you want
Brian Beaulieu 29:48
to vote and people think we are in some sort of age of decline. Now America is losing its progress. The Chinese are going to overtake us we’re not as good as we used to be. The system is broken Kappa Islam isn’t working. All that stuff is negativity that is out there. But so we’re countering that there’s a lot of prosperity for those who want to take control of their own financial and economic future. There’s no lack of prosperity. We are concerned about a future date that isn’t in the next eight years, further out the net, where our governments free spending ways and my friend, I’m sure you’ve been looking at how fast the national debt has been increasing here in the United States. I’m sure you’re aware of how fast China is just subsidizing the agro growth with the House of Cards called debt. Yeah, the world is increasingly Washington is primarily led by China and then the United States, and then Japan, that can’t go on forever. There are people out there that want you to think that it can go on forever Hence, the new monetary theory Martin monetary theory which is this just a joke, but we’re gonna rationalize our lack of fiscal responsibility that gets you into a whole lot of trouble eventually. Yeah, no,
Jason Hartman 31:12
I agree with you about mmt. All right, Brian, thanks for joining us and happy investing.
Brian Beaulieu 31:19
Thanks for having me on, Jason. I appreciate it. Look forward to next always good talking to you.
Jason Hartman 31:24
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