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Mortgages, Markets & Economics with Logan Mohtashami

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Jason Hartman hosts Logan Mohtashami to discuss the current economic state and current events. Mohtashami is a loan manager, stock trader, and financial columnist. He discusses his experiences as a senior loan officer and where he believes the general housing market is headed.

Announcer 0:04
Welcome to the heroic investing show. As first responders we risk our lives every day our financial security is under attack. Our pensions are in a state of emergency. A single on duty incident can alter or erase our earning potential instantly and forever. We are the heroes of society. We are self reliant, and we need to take care of our own financial future. The heroic investing show is our toolkit of business and investing tactics on our mission to financial freedom.

Jason Hartman 0:40
This is heroic investing 175. In this episode, Jason interviews Logan, Mata Shami, Logan is a lender. He’s a student of economics. And he and Jason have quite a long conversation here. This is a six year old conversation. But it talks about unfunded liabilities. They cover that in some pretty good detail. And it’s a story that has gotten worse and has not played out yet. I believe their predictions are pretty solid. They also talk a little bit later in the interview about what money in 2012. And 13 is purchasing properties. Why purchasing real estate makes a lot of sense. This is somewhat of a different perspective that Logan brings to what you will very frequently hear Jason talk about at the time it was cash buyers. Now the story again is very similar. It’s just perhaps a lot more conventional loans from the more typical investors now back into the markets. But I found this to be really interesting to take just a look back a few years, what the landscape looks like and how it’s developed from then and also to recognize the fundamentals that they discussed that were true then, and that the trends that are continuing today, making those fundamentals still really solid. Jason said recently on one of the creating wealth shows that NASDAQ reported the best investment to be in for the fourth quarter of 2018 was cash. And it’s very sobering to think that they might be influencing individuals to believe that kind of thing with the crisis and unfunded liabilities worldwide crisis that is continuing and the private end sovereign debts that are growing and ballooning that people would be sitting in positions of cash, not in the proven historically proven asset of real estate and real property. So we have some competition and attempting to educate individuals on fundamental ways of growing wealth with NASDAQ and Wall Street, and they are not helping people down a path that I believe is going to be successful. And Jason’s report on creating wealth show was is just another example of that. But the fundamentals that are that were talked about here in 2012. In this flashback episode from creating wealth, and that are still true today, I think we’ll set individuals and listeners who to this show and to creating wealth in a much, much better position as we go into uncharted waters, with very, very large debt servicing across the world. So I hope you enjoy this look back here with Logan Mata Shami and Jason Hartman. It’s my pleasure to welcome Logan moto Shami to the show. He is with AMC lending group located in Irvine, California. And I actually met him on Facebook, and really enjoyed some of his posts and articles and invited him onto the show last week. So I’m glad to have him and his father remembers me as a young realtor many, many years ago in Southern California. So Logan, welcome. How are you? Good, good, how you doing? Great to have you on the show. And as I mentioned in the intro there, I really enjoy some of your posts and your take on the economy and inflation and monetary policy. I’ve been following them for a while. So glad to actually have you on the show in real life. First of all, I guess I’ll just ask you about this chart that you posted last week. And I thought it was a really telling chart on inflation. And very interesting. I shared it with our investment counselors. And they have a lot to say about it as well. And this chart basically shows in December 2008 versus October 2012, the percentage of change in the price differences on some things that we all buy and use on a pretty much daily basis and compares them with the consumer price index and, and really shows how flawed the consumer price index is an hour doesn’t doesn’t really state inflationary more than

Logan Mohtashami 4:44
Yeah, really. I mean, if you just look at those things, butter, milk, eggs, gasoline, that being that majority of Americans purchase on and the effect that it has because we have such a lack of income growth. In America that these percentage rises, we’re not talking about four or 568 percent, we’re talking about 7090 100 1600 70% rises in the last four years, a lot of it due to monetary policy. And that has an effect on on a lot of American bugs. And this is not even a, you know, including the drought, which you know, these prices are most likely going to be going up in the early part of the Year in 2013. And these are the things that majority of Americans would, you know, whatever their minimum income is, what would purchase off?

Jason Hartman 5:33
Yeah, it’s just a completely false because they’re saying that inflation during this period has been 6%. And potatoes per pound went from 32 cents a pound, to $1 30 a pound, that’s a 306% increase. Number two on the list, as you mentioned, was butter, dollar 95, in December 2008, and $5 and 19 cents in October of 2012. That’s 166% increase, I’ll just do one more coffee $5 and 49 cents in December 2008 $13 and 69 cents in October 2012, not even two years, or I should say not even four years, sorry. And that’s 149% increase, yet, they really think we’re stupid enough to believe that inflation is only 6%.

Logan Mohtashami 6:27
Ignorance is bliss, I always use kind of a matrix line to this, you know, only in the matrix, you could believe inflation doesn’t exist, I think, what the biggest disillusion is that, because our 10 year note is artificially low. And you know, the rates where we can borrow are artificially low. They believe that to be you know, a main component of inflationary and we just do not have the type of monetary policies a will stop this type of inflation. So majority of American especially the poor get affected the most, excluding, you know, CD rates and everything are so low that you get no returns there. It really, for the for the country, it’s not designed, well, we it’s more acid inflating the Fed has always believed in this philosophy, that wealth creation, by inflating assets is the best way to go. And we’re basically caught right now, you know, we’re finally paying the Piper have years and years and years of bad monetary policy. And even with the bond market bubble that we have, right now, it can’t even juice the economy anymore. So we’re kind of finally or, you know, paying our dues for just a lack of economic discipline for a very long time. So do you think the chickens have really come home to roost as it were, finally, as it finally happened, it’s just, it’s just a mathematical reality. I mean, we have mortgage rates to three and a half percent. And people can’t buy homes. Why? Because they don’t have the incomes to we are pushing the needle to get the stock market going. You know, there’s a chart that I always post a lot of times, when QE is announced, the market goes up. When QE is gone, the market goes down every single time the Fed is targeting the stock market, it’s targeting housing, because they believe that is the only way to inflate the US economy anymore. And you know, we’ve had two financial bubbles two boom and bust cycles, there’s no real income growth in the US. And it’s just right now, this last attempt really shows how bad it is for majority of Americans, because unless you’re invested in s&p index, you don’t see any wealth creation. And I’m afraid that at some point, the biggest bubble of all the US bond market will eventually you know, create the biggest climatic calamity of all, because, you know, we have near $50 trillion of debt around the world. And that’s not including the unfunded liabilities, this will blow up in other one space. And when we blow up, that’s gonna really affect the world because you know, you know, we have 1600 $16 trillion of that debt, we have unfunded liabilities, well over 100 trillion dollars. So we’re just pushing it pushing it, and we’re just not getting the kind of juice that the Fed believes in, I just don’t think there is a there are no more fake magic bullets anymore. And we’re just paying the price right now and might seem like things are going okay. But considering how low interest rates are, and still growing at sub 2% with low taxes, it really proves the point that America is just not financially doesn’t have the capacity to grow like it used to be.

Jason Hartman 9:36
But you know, I mean, one would argue and by the way, I agree with you. Well, first of all, maybe what I want to say about that is one might argue that look, the US is a very mature, obviously the largest economy on Earth, with massive amounts of infrastructure. And you know, isn’t it sort of one way to look at it is that when an economy grows so much as the United States economy has Even back when we were on the gold standard when we It was like legitimate growth back then before 1971. You know, after that it was all caffeine and drug induced growth and smoke and mirrors induced growth. But even then we had so much growth really owning the Industrial Revolution when, you know, other industrialized countries were just destroyed from World War Two, you know, America was the recipient of all that benefit and did very well under that. I mean, isn’t it legitimate to say, look, we had our peak, we plateaued at a certain point, isn’t it sort of like you just go for small rates of growth? And, and, you know, kind of holding steady? And, and and that you’re not going to have a big jump after you had one? You know, isn’t that sort of the way things go? a bodybuilder can only get to a certain point, and he can’t, you can’t? The Incredible Hulk can’t double in size, right?

Logan Mohtashami 10:52
Yeah, well, you know, you here’s a good point. And I’ve had this debate on Bloomberg and CNBC. The the ability for us to grow like it did in the 50s. And 60s, is just not coming back. I mean, we we went from a producing country, that was the capital of production, to now in the, you know, starting from the early 80s, we went to a servicing country, and we had, I think, a near almost $2 trillion economy, we pushed it to 16 trillion, we borrowed a lot of money, we had a lot of wealth creation through, you know, asset inflation, but we’re just not the exporting King or manufacturing anymore. And we’re just services. And if you don’t have the income growth, and a lot of this comes to two things, globalization and technology, go, we were not prepared for both. And we are not going to need the manpower, like we did in previous paths, because there’s no real demand for all goods, not just domestically, but over seas. So we’re going to have a smaller workforce and more efficient workforce due to technology. But we’re not going to have the income growth, as we might have in the 50s and 60s, because the demand for our services, isn’t there as much a good example is look at our greatest innovations in the last few years social media, and you don’t need 500,000 people to run Facebook, you don’t assure 100,000 people to run Instagram, yeah, we’re, we’re becoming more efficient, but it’s coming at a cost. And we just, you know, unless we build something that has great demand, the math is not there, you’re not going to be giving people 1012 13% raises for services that is not in demand anymore. And global globalization and technology has probably number one or two factors for that.

Jason Hartman 12:44
Yeah, I think that’s the really tough thing that Americans, especially college educated Americans have had to learn that lesson pretty, it’s been a pretty harsh lesson is that credentials matter far less than they ever used to, Americans haven’t had a real raise and real dollars in decades. And we have, we have essentially just got it away. Our sciences, you know, our manufacturing, you look at the advancements of the past, they were in the sciences, in the 60s, when it was such an exciting time with NASA and going to the moon and so forth. And in the stuff that we did even in the terrible, miserable 70s. You know, we landed the Viking probes on Mars, we were talking about manned missions to Mars by 1990. But then the welfare state, and all these crazy financial schemes and financial quote, innovations seemed like they sucked away a lot of the resources where we saw the middle class that managed to get along for several decades pretty well. And now it’s just been under attack in the past couple of decades. And the extreme wealthy have just gotten extremely wealthy. I heard recently a stat, that there are 65,000 people on earth with over 100 million dollars in the bank each. And that’s just fantasy land. I mean, that’s, that’s like you’re completely separated from the real world. And when you’re at that kind of level,

Logan Mohtashami 14:17
I mean, there’s a good portion of Americans in this country that have less than $100 in their checking account. That’s that is really, really scary. And it’s and you can borrow money only up to a degree. And when you have asset inflation, such as the stock market bubble, and the real estate bubble and you once those bubbles burst, you fall back to your incomes. And right now falling back to our incomes no matter how low the Fed is trying to push the rates. It’s just the money cannot circulate to the economy enough because really, nobody’s going to pay people more unless there’s demand for their services. And it’s hard. It’s very hard for Americans to kind of look at and think you know what, and good, we have our best run already. You know, and unless we innovate, unless we haven’t, you know, create a new industry where we can compete here and around the world. You know, a good example is everybody was so excited about the green energy revolution. And yet, if you look at the biggest solar company we have here in the United States of America, First Solar, they’re almost not near bankruptcy. But pretty much

Jason Hartman 15:30
all Obama has done with his stupid green energy is misguided, green energy programs is his increased solar panel manual manufacturing in China, and a bunch of and he’s helped a bunch of campaign contributing criminals in the US. I mean, it’s unbelievable.

Logan Mohtashami 15:47
Well, if you look at if you look at why hasn’t solar taken off? I mean, it’s not that it doesn’t work.

Jason Hartman 15:55
No. Well, I mean, the idea is good. But if you can’t get enough energy out of sunlight to pay for the what it costs to produce solar panels, yet, the equation simply doesn’t work. I mean, anybody who thinks solar panels work, they’re just they’re just deluding themselves, the equation, the math doesn’t work, the physics doesn’t

Logan Mohtashami 16:15
go, it goes back to the, you know, how much are you going to pay for that? Now, why is for solar having a problem, because pretty much the Chinese can make them, and even a Chinese are having problems selling their solar companies panels out. But if another country can make them better, faster and cheaper, you’re not gonna, you’re not gonna win exporting this thing to the world. But if nobody could afford them domestically, it’s just not a very good business model. So as much as some of our ideas that we love so much, that even if you had a moral right to it, then it always comes back down to math. And I always post the three minus five equals negative negative two, this is what our economy is, but it’s become, you know, we have we have some great ideas, but the math isn’t there. And long term, you know, our mandatory payouts, like my concern with the deficit isn’t so much of what’s happened in the last four years, because we’re such a politicized country in politics, it’s what’s going to happen between 2022 to 2050, when our mandatory payouts will explode on us. And unless we have four or five 6% growth, there is no way there is no way we can pay for this. And that’s my concern, because it’s my generation that has to take on that mess 1020 years from now, and we just don’t have the type of growth anymore. And we’ve been able to get away with it, you know, with the stock market bubble in fake revenues and fake demand, and real estate revenues that we got in the last decade, but the future of this country, we need such massive tax and spending reform, not currently right now, but to set it up for the rest of this century. Because this is what’s happened in the last four years. It’s nothing compared to what’s going to happen between 2022 and 2015. When mandatory payouts are going to blow up and you see every single debt chart by every single, every single government source that will tell you from that period of time, our debt goes parabolic. And whenever debt goes parabolic, you either become Japan or you become Greece.

Jason Hartman 18:21
But wait a sec, let’s talk about the good side of this. First of all, do you really become Japan or Greece, and I always say this, my listeners are probably sick of hearing it, because Japan or Greece do not have the reserve currency. And they do not have the biggest military in the world to stay the reserve currency. In other words, to throw its way there wait around to force people to accept dollars and to trade in dollars. And we do. And that’s never happened before in history. We can sit here and debate all we want about the Weimer Republic about hungry about Argentina, about Zimbabwe, but we are in a totally different and unique position. Now. I agree that we are going to see massive inflation. But whether we’re going to see Japan or Greece Well, I’d say it’s more likely Japan and a little bit of Greece by the discontents who will be unfortunately impoverished by that inflation. But it’s it’s going to be more of a like a rather than an austerity imposed by saying, look, we’re cutting government programs, the austerity will be imposed by boiling the frog slowly in warm water and just causing a bunch of inflation. That’s where the austerity is gonna come from.

Logan Mohtashami 19:32
I think I think at some point, the bond market does react and does go against us. If nothing is planned. I’m hopefully something will happen next year to address the situation to a degree. But you know, we’re talking about maybe $4 trillion dollars of cutting, we’re getting revenues. In reality, we’re going to be spending $47 trillion in the next 10 years. It’s just not sustainable and whatever we want to do with our debt problem. It has to be a three part plan. We it has to be revenues. It has to be spending cuts, and it has, we have to find a way to grow this country again, without the Fed being so much. So much positive. I mean, when can we ever grow again, without the Fed having rates of zero without some type of government stimulus without taxes being this low, there’s my point to where I could be bullish. I have not been a big bull on the American economy for a while now. Because I, to me, it just gimmicks, you know, it’s, I can inflate this, I can inflate that I could, you know, make food make people believe they’re more wealthier and let them consume and, and spend. But at some point, the training wheels have to go off. And we have to do this on our own. And that getting from that point A to point B to B is in the next 10 years is going to be very crucial, because we can’t have interest rates this low. For a very long time, there’s going to be long term effects to this. And those who believe that rates will stay this low. I just history has never done well that

Jason Hartman 20:59
I couldn’t agree. I couldn’t agree more. So hey, now that we’ve depressed everybody, let’s talk a little bit about how we can exploit this. Okay. And I want to get your take on that. Because by the way, I should mention the listeners, we have never spoken before, except for just three, four minutes before we started recording this call. We have never spoken. I’ve just been looking at your Facebook stuff all this time. And I say Logan and you know, I asked you to listen to my show a little bit to consider coming on it. Did you listen to a bunch of episodes or just one or tell me? I listened to two? Okay, two of them. All right. And so you’re new to my thinking. Okay, so I just want to kind of run this by you. One of the things I always say is that I used to be an optimist. Now I’m just an opportunist. And I think is ugly as things are. And you described it correctly. I mean, the debt bubble. It’s a disaster. I mean, it is just the people running this country, especially with with few exceptions, five decades, almost, of a liberal left wing Congress, most of the time. I mean, there have been a couple of points in there where it’s changed. But even nowadays, the right wing is to the middle or left by by old standards. Okay, they they all spend too much. That’s my point. They’re all a bunch of sellouts. And panderers. And so, you know, we’re in this situation. And the question is, we’ve been on a drunken sailor spending spree for decades now. And obviously, that’s unsustainable. The only reason we’ve kicked the can down the road this long is because we do have the reserve currency. And because we can throw our weight around as a country, and and take advantage of that position. And I think the question, nobody knows the problem, the thing nobody really knows is, how long can we continue to kick the can down the road? How long can we continue to throw our weight around and force bond buying on other countries force reserve currency status on other countries that want to get out of it? You know, OPEC wants to get out of it. Brazil and Russia and China have been trying to trade outside the dollar. It’s not like anybody’s wanting to continue this plan except us, I guess. But that’s the question. First, how long can we kick the can down the road? And there’s no historical example. So that’s kind of the first thing I want to run by you. And then I want to talk to you about how do we exploit it, okay, with these low interest rates, and so forth. But any thoughts on that? How long we can kick the can the one thing that globalization has created, to a degree, we all kind of need each other. And for as much as we have this stripe relationship with China. And actually, you know, Japan has been buying, buying our debt more than China has recently. We all need everyone to kind of be functioning. And I think, in some ways, that’s a plus, in some ways that can be a negative, our debt will, we could continue this until the bond market goes against us. And at that point, when the 10 year note and when rates rise, it will just simply eat the whatever mediocre incomes this country has. So you better have a type of asset to offset that type of inflation, because it’s going to slap us in the face very hard. Because it’s not we’re not we’re not we’re not thinking about it. You know, we weren’t thinking about the stock market bubble before it blew up. People weren’t really, you know, thinking that you know, I shouldn’t borrow $600,000 to buy a house when I only have $3,000 monthly income. This one will be epic in proportion. I think when the bond market when the rates go against us. And when that type of inflation really kicks in into the income. There is where the real pain will start because there’s where you know, profit margin for corporations will go down and there’s where the job losses will continue to go down. And there’s where we have our long term inflation problem And that, to me, it’s six, seven years away if we don’t have a plan to tackle the debt because You know, right now our bonds are artificially low, the Fed is pumping money in there, because of the Spain crisis, which was the best QE ever, you know, money that’s been thrown at us, but at some point that turned and we are not in a position right now. Or, you know, for investors that follow you, unless you have hard assets, where where are you going to get the type of income or investment returns in the next 20 or 30 years? I couldn’t agree more. I couldn’t agree more. Now, one thing that’s interesting is to look at the the reaction, you know, I always say Logan, that there’s always kind of an equalizer to everything in life. So so when you when you say the bond vigilantes, you’re absolutely right about how that’s gonna play out, the rates will go up, inflation will be high, etc, etc. But the question is, what will be some of the reactions to that? So the first government reaction will probably be okay, if unemployment increases, you know, it will be the typical Keynesian reaction that government pretty much always has, like trying to put out a fire with gasoline, which is what we did the last time around, you know, the last few years. And so, what will they do? Will they make, will they expand housing aid? Will they expand unemployment, and keep doling out these fake Fiat dollars, and people will just have to sort of slowly or maybe not so slowly, see the value of those dollars decline, like on your inflation chart that we just we talked about at the beginning of this recording, That, to me, always seems to be the most plausible government reaction is kick the can down the road, try and keep the peace trying just pacify people as much as possible by doing

Logan Mohtashami 26:44
a global race to debase their currency.

Jason Hartman 26:46
Yeah, yeah, it’s a race to the bottom, because every currency,

Logan Mohtashami 26:48
War Three is already actually happened. And it’s the currency wars that are going out there, everyone kind of sees the future. So everyone’s gonna try to devalue their currencies best to kind of prepare themselves, maybe for an opportunity down the road. And with the dollar being pushed up, the rate of the base currency is is is kind of a world model right now, and doesn’t get a lot of play, you know, the currency talk doesn’t get a lot of play in general anyway. But that’s, that, to me is the foretelling the future, about how everyone really wants to bring the value down, because they want to have an edge. And if we’re the last one to that party, I mean, it’s our economy is not set up, you know, to be making more profits or consuming when we don’t have the kind of income streams coming in. And it’s, it’s going to be it’s going to be painful on that side. But yeah, it’s that quiet war is already going on. And you could just see it all across the world, on everyone trying to debase their currency to set themselves up for a better opportunity down the road. Well,

Jason Hartman 27:52
let’s ask you to expand on that a little bit. Because I’m not sure I know where you’re coming from. I know that debasing currencies is a race to the bottom and it but I don’t, other than gaining exports. It’s not something you know, increasing export business, like China does, it’s not something most countries really want, necessarily, is to have a less valuable currency. I mean, I think they’re forced to do it, because they spend too

Logan Mohtashami 28:15
much. Well, that’s the world spends too much, the world’s only spending too much. And it’s and it’s the unfunded liabilities down the road that they all see the end. You know, it’s just, there’s just not enough growth out there to cover the expenses. And we’re finally kind of waking up to that, that, wow, we’re gonna have to shell out a lot of mandatory I mean, I’m not talking about discretionary mandatory payouts have to go out in the next 38 years? And how are we going to grow? How are we going to get the income, it’s not going to be rapidly consuming. And you know, our, you know, our service industry is going to make it up, we’re going to have to export our way out of there. And to be honest with you, I think, you know, the strong dollar is, you know, in the back of the minds of people, our government is not the best thing that they’re thinking about. In a normal world, when you have a strong currency, it’s a good thing. But whenever one is kind of has the same kind of financial debt problems, much like you know, some of the European countries, they have to devalue because there’s no other way for them to grow. It’s a it’s a last ditch desperate effort to try to manipulate growth in your country by devaluing your currency. So not normal economics. But when you’re a lost creature, in the economic growth, that’s what you’re basically your last hope is to just devalue your currency and then hope that you can export your way out of it. Yeah, yeah.

Jason Hartman 29:37
Before we started recording, you talked about cash flow and how cash flow is such an important investment strategy, because there are really very few with even more than one alternative nowadays, in order to get cash flow, right?

Logan Mohtashami 29:55
Yes, there’s there’s a lot of ideas but to me right now, if you follow that Big money. Right now, what are people doing? What’s the big money doing? They’re buying homes with cash. Because what are you getting for cash right now less than 0.30%, you know, CDs, bonds, everything. But buying hard assets, homes with cash. And renting them out is something that, you know, that’s where the big money is going out. If you look at, if you look at housing, which is my area that I follow all the time, if you take the cash buyers out of the equation, there’s not that much existing home sales going on, you know, we have a very high percentage of cash buyers, even now, with interest rates at three and a half percent, we’re running at 30% cash buyers right now. And historically, it’s at seven or 10. That’s big money that’s not mom and pop buying homes to live in there. The big money is being poured into real estate, because if you can manage those properties, that is a very, very nice, profitable, long term business for you for a very long time. And to me, that is where the money should be put in. If you have that type of capital. Let me take a brief pause. We’ll be back in just a minute.

Logan Mohtashami 31:10
You know, sometimes I think of Jason Hartman as a walking encyclopedia of the subject of creating wealth.

Logan Mohtashami 31:17
Well, you’re probably not far off from the truth, Penny, because Jason actually has a three books set on creating wealth that comes with 60 digital download audios,

Logan Mohtashami 31:26
yes, Jason has that unique ability to make you understand investing the way it should be? It’s a world where anything less than 26% annual return is disappointing.

Logan Mohtashami 31:38
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Logan Mohtashami 31:46
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Logan Mohtashami 31:57
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Logan Mohtashami 32:05
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Logan Mohtashami 32:13
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Logan Mohtashami 32:22
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Jason Hartman 32:41
I mean, they’re just they’re just no other options. I mean, what are you going to do put it in a stock market, you can’t put it in the bank, I mean, you’re gonna lose money after inflation and taxes obviously there. And right now you can get a real cash on cash return on on real estate, as long as it’s lower price real estate, obviously, lower price real estate.

Logan Mohtashami 32:59
But and that’s that’s where the big money is going. I mean, you could use even for even if you had a couple hundred thousand, you could buy 234 properties, rent them out. And the difference in returns, you get compared to bonds, CDs, and cash is remarkably big. So that that is to me where the big money if you look at the biggest players in housing, Freddie, Fannie home builders, even the banks, a lot of these institutions, they’re coming out with rental themes in 2012. Even with interest rates being as low because the amount of people that can qualify to buy homes, it’s just not going to be there, that rental market is going to have supply. Definitely for a very long time. Right now. I think the last numbers I saw you had about 5.6 4 million homes that are either foreclosed or delinquent, most of those people will become renters. So you’re going to have an ample supply for a while but the percentage returns you get for buying a property with cash. It’s just it’s just to me, at least it’s the best yielding asset you could get in the United States right now.

Jason Hartman 34:03
Yeah, I couldn’t agree more. I couldn’t agree more. Hey, I’m just curious. What do you think about gold? Are you gold bug? I’m not but no one I think

Logan Mohtashami 34:12
2003 I think it was $200. Two to 222 30. back then. And you know, I just my long term target before I had to revisit gold was about 2400 to 2800. At that point, I’d read revisit my thesis on gold But you know, yeah, definitely for sure that a gold bug for a long time. It did go parabolic last year when it got up to 1900 you know, and needed a little self correcting. But you know, if you look at what gold has done in the last, especially last 10 years compared to every other asset that is foretelling, what has been going on, you have a lot of printing, and even in that chart, I put up gold is up 100% in the last

Jason Hartman 34:58
four years. I mean Well, that’s true. And I tell you, I’d be a gold bug too. If it would just produce cash flow and you know, had income, you can, if you could rent it out, it’d be great. And also if it would produce the tax benefits the income property does. But you know, oddly enough on your chart, you would have tripled your money in potatoes. That’s, that’s even better than gold. Hmm.

Logan Mohtashami 35:18
Yes, definitely. Potatoes, definitely the commodities if you follow Jim Rogers, and he’s been a commodity tool for a long time, he’s been on the show. Yeah, these these bull markets last, you know, 18 to 25 years. And I remember back in, oh, 304, you know, he was saying sugar, you know, become a farmer, you know, become commodity prices are going to go up. It is more difficult. I think it’s commodity investing for for normal Americans is not, you know, there’s not enough information out there. But to your point, even though gold has risen up so much, it does not have the tax benefits, as a hard asset, such as real estate would do. But yeah, I mean, it all the signs of money printing is there, if you just look at them. And you know, this misery index, they’ll tell you, there is no inflation, outside of the things that you buy and use every day. So at some point, that other hand of inflation will come into the picture. And there’s where you know, hard assets will really be beneficial for your investment thesis, but I cannot agree more with buying real estate with cash, just kind of doing type of environment where even though the Fed would want to push you into the stock market, the safety in the cost of shelter, you know, for Americans, because that is something that the supply will be there. You know, as long as you know, we have a country where a stock, you know, a company can go bankrupt overnight. But the price for shelter will be there always that demand will always have ample supply.

Jason Hartman 36:58
Yeah. And I and what I what I like to point out is that you alluded to this earlier, is that these people that are getting foreclosed on, they’re going to be forced to stay in the rental pool, we’ve got Gen Y, the largest demographic group in American history, 80 million people bigger than the baby boomers slightly moving into their prime rental years, they’ve got massive student loan debt. They’re not unfortunately, they’re not gonna be able to buy

Logan Mohtashami 37:23
Actually, that’s my recent article I just wrote a few days ago, really was, you know, I call that the young and the renting. Yeah. And, you know, if you look at Pew Research, you know, 41%, of people aged 18 to 34, are going back and living at home. And, you know, for those who actually have a job they’re renting. And, you know, what I explained in the article is that, you know, I, I talk to this age group a lot, and a lot of them tell me, you know, what, getting that 20% down, and it’s not, it’s not happening, even getting an FHA three and a half percent down. It’s a little bit daunting. But they say, you know, I’m not gonna, I’m not married, I’m single, or, you know, I’m still working. Why would I want to be buying a house with such a low down payment, maybe when I’m settled down in my careers, you know, good. And that’s when I’ll buy. So you not only do you have two people moving back with their parents, you’ve got a group that even have the income that is saying, I just, I’m just not comfortable with buying a house, but I will be renting. And I think that’s a shift in, you know, one of my articles in 2010. You know, I predicted that maybe we have seen as you know, a society shifts on homeownership to renting I think we have Yeah, and, and they and to be honest with you, they lie to you every month, on the number of the homeownership percentage rate even today, where they come out, and they say it’s 65.5%, homeownership rate, census counts, all delinquent homeowners, as homeowners, you know, we have millions and millions of people who are considered to be homeowners, some of them well past the 90 day lates, there’s no way they’re going to be able to keep their house, if you take all of them out of the equation who well below 62%. And those people will either be moving back to their families, or they will be renters. And when you have that big of a shift from a bubble high of 70%, or you know, that level too low to coming down to the 60s, this the psyche of Americans change and the thought of homeownership changes and because lending standards are going back to common sense, not not strict common sense that the lack of the capacity of Americans to buy homes has gone down dramatically because we have no income growth. So the rental market will have a steady supply. This is why you see the big boom and multi multi family production. Oh yeah.

Jason Hartman 39:58
I mean, yeah, I mean Yeah, I mean, multifamily developers who build apartment buildings, they’re just, they’re just building everything they can right now because they see that we’ve got 10 years easy, unbelievable rental demand. And you know, one more thing I’d love to get your take on maybe this is the last thing because you know, we’re going long on time. But you probably have a lot to say about this. I don’t think we’re gonna see Fannie Mae and Freddie Mac last forever, because those are, those are insolvent smoke and mirrors, government supported entities anyway. And if they are let go, if we cut those loose to the free market, I mean, wow, it’s going to be mortgages are going to be much harder to come by the homeownership rate is going to plummet, which means more renters.

Logan Mohtashami 40:42
I could not agree. You know, this is the one thing that doesn’t get talked about a lot. When they talked about reforming Freddie and Fannie, I think the article I wrote last year was Freddie, Fannie and Guantanamo Bay. You know, they say they’re going to close it down, but they are going to let this sucker go as long as they can, because they know, once this is over, you might not even see a 30 year product 10 years from now,

Jason Hartman 41:07
think about it, why would you the rest of the world doesn’t have 30 year mortgages. That’s an American thing.

Logan Mohtashami 41:12
Private sector is cleaning the business, private sectors pulling out of their money, then they are not going to go head to head with Freddie, Fannie. As long as these rates are so cheap, there’s no one with all the regulation,

Jason Hartman 41:22
they can’t make any money. Yeah, that’s ridiculous. That’s

Logan Mohtashami 41:24
not you’re not making money. It’s a big hassle. The capacity of lightning in this country is hideous. I mean, it’s just hideous. And that’s a byproduct of having that financial real estate housing bubble. But the future without Freddie and Fannie and my thing for the last two years has, I’ve been a bear on FHA for a very long time, because their capital reserve ratios are so bad, it is the most under reported item and housing. They were down FHA needs $2 for every hundred dollars, they insure they were down to 24 cents for that $2 back in November last year. And they needed one bailout already. It’s a quiet bailout, the robo signing settlement gave them a billion dollars in cash. And the house already passed a 2012 FHA solvency act. They, they are what I call it, baby, Freddie and Fannie. And once that goes away, the Treasury will have to give them a credit mind, but you take FHA out of the out of town, it’s huge. Wow. too hard, really, you’re looking at least 20% less sales

Jason Hartman 42:33
for the upcoming year. And they are just hanging by a thread, because they were not designed to be a primary lending source that but a pitcher was designed for first time homebuyers they weren’t designed for. I mean, I have clients getting FHA loans that are 780 FICO score debt to income ratios in the low 20s have 401, k 529, they have all this. They don’t have to 20% down but they can get an FHA, the exposure that they have right now is it’s it’s not as bad as Freddie and Fannie, Freddie Fannie got up to, I think, 75 and 72 to one leverage ratio, but they’re in the 30s right now, and MF Global filed for bankruptcy, because their leverage ratios were that high, but you hear nothing from the government on FHA because they know that that wasn’t working for them, the housing market would suffer, and does the rental theme for the next, you know, 30 4050 years, because there’s no way FHA will be able to be solvent, it’s just going to be another Christmas Eve, you know, Geitner giving them an unlimited credit line. But I think that that, that that goes away to I think Freddie and Fannie and time will go away. But going back to your original point, once the private sector gets back in the cheap money days of 30 year fixed mortgages are gone. You know, they’re not going to, you know, they’re going to actually, you know, you have to pay up to buy a house. And then yes, unless you have income growth, the capacity for Americans to die is going to be limited. I mean, you, you see that right now, with rates of three and a half percent, or magic, six and a half 7%. With rising inflation, it means it means renters and renters at a much lower standard of living than you have. Now, folks, I always say this, it’s it’s not because someone could listen to this conversation with the uninformed mind. And they might say, well, gee, this is really scary. Hey, I hear this question all the time. Well, not all the time. But some of the time. People say things like, hey, Jason, you’re such a pessimist and you’re so negative about so many things. I mean, if we’re going to have higher unemployment, we’re going to have all these problems and people are going to be broke. How are they going to be able to afford to rent my house? Well, they’ll be able to afford to rent something. The question is, will they have three roommates? And will they be moving down? You know, I always say it’s just it’s just looking at like two ladders, okay. And your tenant that you you talk to five or seven years from today, if you had a conversation with them, they might say, in just in 2018, for example, six years from now, you’re talking to one of your tenants, and your tenant lives in that property you own and it’s a 1400 square foot house, and who knows what they’re paying and rent because that all depends on inflation, it’ll be higher, for sure. But you might talk to them. And they might say, Well, hey, I used to live in a 2500 square foot house that I owned, and it was in a better neighborhood than this, and now I’m poor, their standard of living is going to decline. It’s not that there won’t be someone able to rent your property. It’s the question is, what will they be renting? They won’t have as nice a lifestyle as they used to have, they’ll have an older car, they’ll have the older iPhone, you know, I kind of throw that in, because, you know, trite, they may not have a cell phone at all, you know, because maybe they can’t afford that in the future. Who knows, but they’ll just have less of a lifestyle, they’ll still be renting something, they got a beat live somewhere. And they might be running on a government eight section eight type of program, which will probably be expanded, frankly, under the inflationary pacify the people type of mentality that we’ve had will probably expand. But yeah, you had a comment on that. Just before we go.

Logan Mohtashami 46:19
Yeah. Going back to your you were saying people asking you for pessimists. You know, in general, you know, people that know me my whole life, I am a 100%, optimistic, pounding my chest, go America kind of guy. And since I became a financial columnist, in writing, they friends are looking at what happened to you. And I felt I, I honestly, I just follow the math. And if this doesn’t get you to think, think about what we are doing right now, we have low taxes, we have low interest rates, the Fed has poured trillions of dollars in the system, we’ve had government stimulus between the jobs programs, bailing out Freddie and Fannie food stamps have risen up, you know, up to $70 billion dollars across the US each of the 2000. And that will continue for a while we’re doing all this, and we’re growing at sub 2%. If that doesn’t make you think there’s something wrong, I don’t know what will end once the map changes for me, then I will become more bullish. If I saw incomes rising. If I saw a new industry, for example, if natural gas was, you know, expanded here in the United States of America, where we actually had pricing and supply demand and jobs were created, then I could be a little bit more bullish. But if everything you’re doing is to just get sub 2% growth, the future can’t be good unless you unless you get expansion in jobs and incomes and we’ve got expansion in jobs and incomes, I would have a different take right away. But for years, I’ve been saying that we’re not going to have this booming recovery that everyone thinks, you know, when the White House was talking about 4% growth in 2012. And three and a half percent growth in 2011. just didn’t have the capacity there. And that’s what you have to look at follow the map. We were so polarized as a nation that you know, Republicans or Democrats, you know, we want to get an ideological but forget about all that. I try to just focus on the math of everything. And if we’re just going at sub 2%. Now, with this, what’s the future gonna hold? And if we get jobs and incomes growing, that’s that’ll be positive for this country? If we don’t, Boy, that’s it’s just not not not a very bright future?

Jason Hartman 48:29
Well, I all I can say is, I hope that I hope that America is at the center of some new energy breakthrough or nanotechnology breakthrough or biotech breakthrough, because then maybe, maybe we have

Logan Mohtashami 48:43
something Yeah, I mean, I’m not a big energy guy. But if you have I plug in the numbers of natural gas, and really, it’s the one thing we actually have supply and pricing power on against the world, there already acts in Congress to try to prevent us from exploiting that because they want the energy cheap here. Besides of that, I don’t see anything out there that’s going to create and you know, kind of, we don’t have a Henry Ford, we might have Zuckerberg, that’s great for 3000 people and shareholders for Actually, that’s shareholders for Facebook, but we don’t have an industry that’s going to create a lot of jobs where incomes are going to grow up. And that’s that’s what we’re missing. Is that new kind of Henry Ford guy to come in there and say, hey, guess what, here it is. And then the multiplier effect goes off on that. And housing used to be something like that. But again, we don’t have the income to purchase homes, you don’t have the multiplier effect on the economy as much as the Fed would love for housing to recover. Just look at how many cash buyers we have in this even though rates are at three and a half percent.

Jason Hartman 49:41
Yeah, it’s something Well, hey Logan, give out your website if you would, and tell people where they can learn more about you and your writings and follow you because you’ve really got some good stuff.

Logan Mohtashami 49:49
Sure, sure. I write for Ben zynga.com but you can follow all my articles at www logon photoshopping.com LGA MOH ta sh and I and family run business AMC lending group has been serving California residents since 1987.

Jason Hartman 50:11
Fantastic. Well, Logan, appreciate you being on the show and keep up the good work. Okay.

Logan Mohtashami 50:15
Thank you, you too.

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