Marcroeconomics and the Housing Recovery Index

Marcroeconomics and the Housing Recovery Index

Jason starts the show illustrating the uniqueness of the US real estate market which has been more consistent than any other market in the world. He goes into the transparency of the US and our ability to research properties. After, he discusses the housing market recover index and the latest reports. Adam Robinson joins the show to talk about macroeconomics. The US has an economic system that is based on radical consumption. Then look at this and how COVID-19 has changed our lifestyle from what we eat, how we consume, and how we look at real estate.

Jason Hartman 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 on now. here’s your host, Jason Hartman with the complete solution for real estate investors. We have got part two of global macro advisor today but If you haven’t done so already, I must encourage you to watch our new webinar. This one is good. It’s good. It’s good. This is a market profile webinar for Florida in Georgia. And you know, there’s that song The Florida Georgia line, so I figured it was kind of easy to remember. Just go to Jason Hartman, calm slash Florida, Georgia, Jason Hartman, calm slash Florida, Georgia. And many of you have really been pleased with the asset defense asset protection webinar, and the incredible deal frankly, offered by the attorney featured on that webinar, which, by the way, is a super good deal. Everybody has pretty much unanimously agreed with me on that. And just a reminder that one you can watch and you may want to see that one again. I know that’s a there’s the stuff is gets into the weeds. So if you want to see that one, it’s just chasing her dot com slash asset protect your ass at Jason slash asset. So there’s two great webinars for you this weekend, as we celebrate in the US the Fourth of July Independence Day. And I tell you after the fake race war is over, and the marginally fake Coronavirus scare that’s not obviously totally fake. That’s just sort of an opportunistic thing. I guess you could say that true. That’s true about the race war too. You notice how I just so sort of just throw these things out there, right? Just throw them out there. civil unrest in the craziness, but hey, weren’t you happy to see the Seattle mayor who kind of let everything go on? hypocrite hypocrite. And then when it’s right in front of your own house? Oh, it’s time to shut this down, of course, because it’s affecting my life. So finally, the Seattle Mayor took some action

Jason Hartman 3:01
Government, you know, if we if we leave this stuff to these corrupt politicians, what a world we would be in. Thank God we have some redress. And by the way, I have to say, I know we have a lot of listeners in Hong Kong, and you know, a decent amount in mainland China too. I gotta say, I am sad for what has happened in Hong Kong. As you may know, the deal was, when Britain turned it over, back to the Chinese government, it was to remain a special administrative zone for five decades, until 2047. And the Chinese government, you know, the CCP, they, they’re just not so interested in freedom, you know, so, they have really cracked down on Hong Kong and I doubt that will remain the financial capital. To the extent it has been in the past. You know, this is the thing this is One of the things and we’ve talked to some degree over the years about international investing, you know, I have been to 87 countries I’m very much like to think of things as a world perspective. I like to think of myself as a citizen of the world, not just of the country where I actually have citizenship the United States. And as such, you really when you look at real estate investing around the world, and this may well change, okay, you know, I everything I By the way, here’s my disclaimer, okay? One of many, I reserve the right to change my opinions because things change, okay, things change. You never want to be that dinosaur that views the world from a lens that is out of date, as the world has changed all around them. But right now and for the long, foreseeable future. At least from this vantage point that we’re in today, the US has of course, such a unique real estate market. It has such a unique market in so many ways, greater data transparency, better rule of law, access to comparable sales information, uniformity of practices. I know I say embrace the fragmentation and it is fragmented, but compared to what compared to the way they do things in other countries, this is not fragmented at all, folks, if you compare it to that, and the MLS, just the fact that there is an MLS system of multiple listing service, and just the customs and the procedures and all of that stuff. But in addition to that, the lack of political risk, I mean, think about it, if you were like so many in investor in the Hong Kong Very, very cyclical real estate market. As you know, there are three types of markets in the world, linear, cyclical and hybrid. And Hong Kong would definitely be classified as a cyclical market. But you add to that, and then, of course, the speculators, some of them made a fortune investing in Hong Kong real estate. And Carmen and I were there last year and had a great time. Well, except we did get into one argument that wasn’t so fun. But other than that, other than that, we had a great time. And you think of when you look at how rich that little special administrative zone is, in or district, I should say, and then you look at Macau, we went over to Macau as well. And boy, I had I think for the first time in my life, they’re in ear infection. And we walked into this Chinese pharmacy in Macau. And the guy didn’t speak much English and I pointed at my ear and he gave me some stuff. I just took the chance because it was bothering me so much it really hurt. I think that’s the first time in my life I actually had an ear infection. Maybe when I was a little kid and don’t remember it, but never had that before and that that was bothersome. But I digress. So I took a chance and put the drops in my ear. And I guess it helped a little bit. But that was that. What was I saying?

Jason Hartman 7:20
Oh, yeah, Hong Kong. That’s what we’re talking about political risk, and speculators in the Hong Kong market at the right time buying properties. They made it gobs of money. I mean, gobs of money, you know, if you’re lucky, and it’s pretty much just like folks, investing in a cyclical market and being the beneficiary of a good cycle. You know, that’s the road to riches because those properties will never ever make sense. From day one. They will never follow. commandment number five. What is commandment number five you ask? Thou shalt not gamble, no gambling. No gambling, invest in properties that make sense the day you buy them, and how do you know if they make sense? Because they have good cash flow. They have a good rent to value ratio, which by the way, not being a dinosaur. See I’m not a dinosaur. I revised the rent to value ratio in a recent episode. Yes, yes. Yes. Why did I revise that because the world changed around us. The world changed all around us. And we have to make new metrics and new ways to valuate properties when the world changes. How did the world changed? Well, we got the lowest interest rates in 3000 years. 3000 years, the lowest interest rates in 3000 years. Did you catch that? Yeah. No, not 1000 years, not 2000 years. 3000 years. So if you think of someone in Oh, I don’t know, let’s pick 800 bC 800 BC, you know, if you’re out trying to buy something and borrow money, you know, you there was no federal reserve back then clearly that was, you know, that was like, the Federal Reserve has only had like one 30th of that life and it’s been too long. Because most people listening were not alive when the Federal Reserve was created. In fact, I would venture to guess nobody listening was alive when the Federal Reserve was created. But it is possible because there are some people that are old enough to have been alive when the Federal Reserve was created and still be listening to the creating wealth show. Thank you for listening. We appreciate it. So 3000 years 800 BC, you borrow money you you find A real estate deal you liked in 800 BC, and you pay a higher interest rate than you’d pay today. Yep, that’s how good it is, folks. Make sure he’ll appreciate it because it just got even better. So here’s an article from housing wire it says housing market recovery, things are looking up trends remain positive. See, if you got all into negativity during the COVID crisis. You’d be missing this now, but I know most of you aren’t because, hey, you’ve been buying properties like hotcakes. And I guess the overall impression is hotcakes all was sold really well, don’t they? So they’re selling like hotcakes is the old saying, Well, you know, I haven’t had a hotcake in years. And you know, I I’m not gluten free. I eat gluten. I love bread. You know what bread I especially love the most. If by the way I know we have a lot of listeners in my old hometown, Orange County, California. You go to Mastroianni pront in Crystal Cove in Orange County, California, which is Crystal Cove, basically Newport Beach superduper high end area, where by the way interestingly a lot of people that live in Crystal Cove and in Newport coast that sort of sister area where I used to live I own three homes in Newport coast. And a lot of people that live in those places have cars with Nevada license plates. Hmm, that’s interesting. They are Nevada residents. Hmm, that’s interesting. Yeah, Nevada residents but they live in Crystal Cove or Newport coast or Laguna Beach, whatever. I guess they’re they don’t want to pay California taxes. See whenever you rip people off, this is for you state of California and Governor Gavin communists Newsome and he has a I’m gonna call him governor nuisance because He is a nuisance to productivity for sure.

Jason Hartman 12:05
So governor nuisance By the way, Governor nuisance, you’re certainly welcome to come on the show. I love to chat with you. I promise I’ll be respectful, even though I will probably shred your silly ideas that you have, but they’re not all silly. I don’t disagree with everything you do, but you know, a lot of things. Anyway, Governor nuisance chases people out of the state, as governor moonbeam. Jerry Brown did before him with their oppressive taxes. So anyway, back to the subject at hand. Jason Yes. stay on track here. Okay, so the housing market recovery index says that things are good. The index is set at 100 100 is sort of that benchmark okay. Set at 100 for the last week of January, right as COVID kind of really hit in the value of 100 means the market has recovered to the pace seen that month. Okay, so it was booming COVID hit, everybody freaked out right. Now, where does it stand? That is the question. That is the question. To be or not to be. That is the question. Okay. Well, the housing market recovery index reached 95.8. nationwide. Now that’s nationwide last week, for the week ending June 27. And 12 of the 50 largest markets are showing recovery with the greatest occurring in hell. This really amazes me. I wonder why this is so you always have to dice spice and dice the statistics to know the truth of what is really happening. I guess it’s kind of like what we shared yesterday. When you go, trough to peak then it looks really Good and my argument is that’s why the stock market likes and I would argue, designs. Dude, dude, dude, that’s my Twilight Zone invitation. I know it’s really bad. Yeah, don’t hire me for sound effects, voiceovers impersonations of celebrities or jokes cuz I’m not good at any of that stuff. But I’m good at investing in a good economics anyway. I’m pretty good dog Dad I think. I don’t know Coco. What do you think? Yeah, she’s over there land down. I’m not bad good. Because if I was a better dog dad, Coco would get a lot more exercise than she does. But we do okay. Anyway, I would also get a lot more exercise than I do. And you know, I do okay, but could be better. always room for improvement folks. So here there so I would argue that the conspiracy theory that the stock market designs volatility in So that they can use those Valley to peak comparisons and say how good things are. Remember, that’s what I shared on yesterday’s episode, how the Dow is up, you know, the s&p is up, oil is up 80%. You know, well 80% from what compared to what the Jason Hartman question says. So yeah, you know, it’s all it is what it is Anyway, you can see through it. So here they’re saying, greatest recoveries in here ready for this? Boston, San Francisco, Seattle, Denver and Philadelphia. To me, that is suspicious, but I think they’re saying that because they have the greatest declines. And what else doesn’t this tell you? It doesn’t tell you what the recovery index measures is it measuring sales volume, sales prices, number of listings on the market number of listings sold, is that the pending home index? In other words, the deals that go into escrow under contract? Or is it the index of closings? Because of course, that closing has a at least a 60 to 90 day lag behind it, as I’ve taught you many times over the years. So for whatever it’s worth, but I can tell you anecdotally, and I, you know, I don’t have my own index, I should have my own index. Why don’t we have the Hartman index?

Jason Hartman 16:30
Please check into that. We need to have an index, what would it measure? Well, I think it would measure compared to what something along those lines would be good for the Hartman index. Okay. Think about that, folks. If you have an idea, I’d love to hear from you. Jason Hartman comm slash ask, and maybe we can make a Hartman index. Hmm, that’d be cool. All right. It says in the US the overall weekly index value calculated as a weighted composite of four index components including housing demand, based on online search activity. Okay, so that’s only on search activity that’s not on what happened activity yet. But wait, there’s more home prices based on the median list price. That’s important. What is the home price based on? Then housing supply based on new listings and pace of sales based on median time on market? Okay. I think that’s actually that’s kind of an interesting index. I like that. I like the way they’ve done this. Now the question is, compared to what? Right It’s all that’s the question again, because it’s compared to what in those in the items that the index is measuring. Remember, when the Consumer Price Index. Let’s use that as a comparison here to talk about it in our thought experiment, when the consumer price index measures inflation or deflation. Remember, the way they trick us that I’ve taught you over the years, is they measure fiddle and adjust the dials. They keep adjusting the dials on three things. The three main things they keep adjusting the dials on, okay, so think of it as a stereo system, right? Mostly Think of it like an older stereo system with knobs and dials because it’s much more cool to visualize it that way. You know, you might have volume, volume is the big knob or dial right? And that just turns the volume up or down. But then you might have three others, and what would they be they be treble for the high pitch sounds, and mid range for the middle and then base for the low end. So you could adjust the volume but You could also adjust the treble and get the high zones sound like the B G’s. And then you could adjust the middle. Now that was bass I was doing. Let’s get it right here. This is the mid range right here. That’s kind of mid range. And you could adjust the bass and the deep sounds. Now that wasn’t a good way to do it. I put my hands over my mouth to make that effect. How about this for bass? You could adjust the bass. You know,

Jason Hartman 19:29
it’s the end of the day here. I’m getting a little punchy. It’s been a long day. Well, most of them are long days. So when you adjust these things, it’s like adjusting the inflation index waiting hedonic and substitution. That’s how you adjust the weighting of what things in the index are making up the important part. So let’s dive into this one. And let’s talk about the housing recovery index. Okay, remember what I told you I said search activity Home prices based on median price. And that’s very misleading. It could be very deceiving their housing supply based on new listings, that’s pretty clear. And then pace of sales based on median time on the market. Notice, median and average are of course not the same thing. I don’t need to go into that. So the search activity is 10% of the index, the median, or they are the median list prices, not sales prices. By the way list prices are 30% of the index. And the supply of new listings is another 30% of the index. And the pace of sales is another 30% of the index. So there you got 100% when you add all those three up, or all those four up, so yeah, for whatever it’s worth, it’s interesting, but I can tell you forget about indexes, and anything complicated, I can just tell you, real estate sales are booming, booming, booming, so There you go. Let’s get to part two. But I know you’ve been waiting for this. And I better just tell you today because I don’t want to have to wait till Monday. Now, before I tell you this, let me just tell you, pages not totally finished. So I’ve been holding off, but I’m gonna, I’m gonna share the link. Because I know you’ve all been bugging me like crazy. And I appreciate that. I’m so glad you’re so interested to register for our upcoming meet the Masters virtual conference. We don’t have all our speakers on the page yet. We don’t have all our topics on the page yet. So most of you are just gonna go buy tickets. And we love view. We appreciate that. But hey, after you buy the tickets, check back middle of next week. Watch the page evolve as we add more speakers and more information to the page just so you can get more and more excited about the event. But here it is. You ready? You can go get your tickets now. This is the announcement you’ve been waiting for. Jason slash masters, Jason slash masters to get your tickets for our virtual meet the Masters coming up. We’ve got George gammon, Harry dent, we’ve got several other speakers we’re going to be announcing, as well, and it’s just going to be a great fun event. So go register Jason Hartman comm slash masters, get your tickets. And here is part two as we talk about global macro economics.

Jason Hartman 22:30
A lot of the environmentalists would talk about how this I agree, even though I don’t agree with the way environmentalism has been so politicized, and a lot of truths have been told since then, but yeah, conceptually, this concept is interesting, you know, this whole world built on consumption, consumption consumption, and you know, if you look back to the time before the 20s Okay, you before and I don’t know if you know who like Edward Bernays is, and he’s written a burning Oh, okay. Okay. Yeah, you know, you know, okay, so he created modern advertising, modern public relations, and so forth. And, you know, Americans were pretty frugal bunch. And in all the time before that, so far as I can tell, frugality was like a virtue. And it was something that was considered you weren’t considered of good character to be frugal. Now, at least maybe recent events are changing that but now you’re considered a cheapskate, and no fun. And, you know, it’s been all about bling and showy cars and whatever everything we could consume, you know, we can’t have a system that’s based on just radical consumption forever. That Okay, that is a losing battle, isn’t it? Essentially a losing battle and I’m going to give your, your listeners a framework for understanding really anything being human. And that is the notion of question and answer and I’m going to get back to consumption in a sec. Okay? So everything human is an answer to one or more questions. So for example, the coffee that I’m sipping it’s an answer to a question. What can I drink that will satisfy my thirst and give me a little late afternoon paths? Coffee? This podcast is an answer to questions your listeners have Where can I go for World Class information on topics of a financial nature curated by by someone I trust? That would be your podcast right is an answer. Your podcast would not be an answer for someone seeking what hairstyles are prominent or or how to cook a chicken. Yeah, right. You would not go the that would not you would not be an answer for that question. And so I say that because even marriage is an answer to a question having children as an answer to a question. Los Angeles is an answer to a question. So for ambling laboring this point for a second punch line coming? Yep. So if someone wants to get ahead in the in the media world, or music or arts or entertainment, LA is an answer to that question. Right? Euston. Texas is not an answer to that question. Use in text would be an answer to other types of questions, but not that one. Yeah, like oil. Yeah, right. Right. Right. So, so it’s really important. So what’s happened in the world is we’ve equated things, even consumption is an answer to a question, right? We would hope, right America that predicated on freedom, giving one the opportunity in pursuit of happiness and liberty, right? You think about those things freedom, and happiness and opportunity. That’s what America was about. And what’s happened is, we’ve acquainted if we get enough things, then we’ll be happy. But if it’s left the world, you know, in a state of despair. And I, I stated earlier, I only state what I know if your listeners, this is an experiment that each can do on Google, if you go to the Google landing page, and in fact, you know, Jason, you can do this right now. You go to the Google landing page got to be the Google landing page answer. And he type in type in this so about a year ago, I was curious, what are people interested in learning how to do okay? One would be like learning how to create wealth right can be one thing. So let’s type in without hitting Enter to see what it autofills How can I learn chip? Oh, okay. Okay, okay. Yeah, I get it. That’s good idea. Okay, and what, what’s the number one? How can I learn to Okay, sing, love myself. Code. Pure code, speak Spanish. Draw. play the piano code for free. do the splits play guitar The second one that has been really critical myself, you know, how can I learn to love myself? Now wait, wait. Now here’s another type in. Why do I steal stuff? Okay, I bet it. Why do I feel? So?

Jason Hartman 27:13
We didn’t think we were going to get a psych psych psychology session out of this, but this is great. Why do I feel so bad? And here’s the answer. Tired. And number two, alone. Three bloated, weak, empty, sad, hot, nauseous, cold, depressed. That’s it right? hired by the way. Yeah, is a euphemism, right. Depression. Yeah, I agree. So I’m saying this. This isn’t a lesson. This isn’t an idle lesson in psychology. Yes, your your listeners are interested in growing their wealth. And it’s important. They understand that that’s what’s going on in the world. And that we’re dealing with a world that has gone into debt, to buy things that didn’t really need have left them indebted and feeling depressed and lonely and empty. So this is what’s going on right now is a radical reshift recalibration and everyone’s going, wait, I’m going What am I really glad you said that. Okay, so here in my pandemic investing presentation, a lot of our thoughts just mirror each other’s This is really interesting. You know, I have predicted that this recovery when we wake up from this, we are going to wake up to a much smaller economy. And the reason is that 70% of our economy is based on consumerism. And I think people have really, truly changed. I think they’ve reevaluated their priorities, they are going to seek a simpler life. And I think a lot of this has been good for us in some ways, because a lot of people I think, including myself, are really thinking about it. What is life really about? It’s not about showing off a driveway full of overpriced cars. It’s just not about a lot of this crazy stuff that we’ve all been doing. You know, it’s definitely still about financial freedom. But it doesn’t have to be about massive consumerism trying to fill a void. There’s a real centering. I think that’s going on, I think, a movement toward a simpler life. I could not agree more. Not surprising that you and I near each other, you come at it, you know, we come at it through different lenses and arrive at the same point. And I could not agree more. And now the challenge in the world is that people are gaining enlightenment about really what matters. If each of us look at what we’ve done in the last, you know, 10 to 12 weeks, we’ve narrowed down the number of people we see and reach out to wood thinking about, you know, how we spend our time and with whom And right product purchases, we’re thinking, do we really need another one of those? Yeah. And no, actually, right. We don’t like I. One caveat to that before you go on. It’s kind of interesting is that people are spending on the home, The home has really become the center of the universe. And I think that trend will continue. People want to have a nice comfortable home because they’re stuck in it so much, and they’re afraid they might be stuck in it again. So they are spending on home exercise equipment, furniture, home office equipment. I’ve definitely been spending more on my home. Okay, because I’m spending my time. No, right. I didn’t say we weren’t spending money, right? Do we need another one of those things? And right now you’re exactly right. What’s going on is money is shifted away from external spending. We’re not going out to restaurants. So that means we’re going to end doing things socially. Tourism is 10% and let that land while the global economy 10%. That’s gone, that’s just flat out gone. So for global GDP just from tourism, that’s gone. So that’ll take $8 trillion or so away from the global economy, right? Because it’s about an $8 trillion GDP. Right? There you go. So what’s going on is a re shifting of the where we spend the money. So for example, clothing, we don’t need lots more clothes. We’re not going out as much, and we can rewash the things we have. But we are you know, if creature comforts at home, that’s where we’re spending our money. We’re not going to Equinox gym, we’re going to buy a peloton. Yeah, right. And by the way, Putin stock was getting through the rush, or he was getting crushed, and now it’s through the roof,

Jason Hartman 31:55
the roof, and so there are lots of things you look at so anything involving work at home or play at home. Right stay at home has done extraordinarily well. Anything related to commercial business activity has gotten crushed. Yeah. And so airlines, they’ve gotten crushed, right, but zoom meeting, right zoom stock VM did were Microsoft, right? Anything that a technology that allows you to do things at home, right, or interact right distance from at home, right, like zoom meetings, like or anything involving entertainment, doing things at home, whether it’s exercise, entertainment, living, so you’re right, things like Lowe’s and Home Depot flow. People are spending a lot more on home improvement. Absolutely. Yeah. Swimming pools. Okay, we’re not going to go out there. You don’t want to improve our pool anymore. Yeah, right. Right. A number of these trends were in place before COVID and COVID is just accelerate. rated some confidence and also everything yeah, just accelerated so much. And so you’re right. Of course people are spending. It’s a shift. They’re not spending it outside the home. They’re spending it inside the home. Yeah. Right. So like inside the home and anything that allows us, you know, to reach out to the home via technology, those companies have done extraordinarily well. Yeah, absolutely. Very interesting talk, you know, I could talk with you, Adam for three or four hours quite easily. And you’re, you’re an interesting person, you got some insights, wrap it up for us with any closing thoughts, maybe something we didn’t talk about already. Whatever you want to leave us with? Well, I think the key thing is this. I’ve spoken about this team since three and a half years ago when I was with Tim Ferriss, like, back in 2016. I said, pay attention to things that don’t make sense. And that’s true internally when you yourself as an investor, your listeners, right so each individual your listeners, when you yourself go, Hmm, that’s odd. Or you hear a commentator, or some political or corporate or, or some expert on something, say, Hmm, that odd that anomalies are signs of enormous opportunity. And instead of just going, huh, that’s strange and forgetting about it. So, huh, that’s strange, great. That’s a million dollar opportunity or more. And so whenever things don’t make sense in your environment, or you hear others saying it, they are blind to what’s going on. They go Hmm, that’s strange. I wonder why that stock keeps going up. So again, things that are or something’s going down doesn’t matter. That’s a sign of something hugely powerful. Get in on it. Yeah, don’t make sense. Very interesting, Adam. So watch out for those things that don’t make sense that’s that’s counterintuitive but it needs to be considered because this time it really is different. I think we we’ve agreed on that right? Absolutely. Yeah. Good stuff. Adam give out your website. I freely business I want to thank you Jason for for giving me the opportunity. I try to share what I know about the world freely. And my clients, you know, more detailed information that hedge fund managers are different but but such wisdom I have about the world and insight I’d like to share if they go to I am Adam I share a lot there. And Twitter. Again. I am Adam Robinson on Twitter. Yeah. Okay. Both Excellent. Excellent. Adam Robinson, thank you so much for joining us and happy investing. Thank you so much, Jason.

Jason Hartman 35:59
Thank you. So much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.