On this show we’ll hear from Paul Harvey, Jim Rogers, Ron Paul and truth challenged Ben Bernanke about commodities investing and the virtues of trading fake dollars for real assets.
Announcer: Welcome to Creating Wealth with Jason Hartman, President of Platinum Properties Investor Network in Newport Beach, California. During this weekly program, Jason is going to tell you some really exciting things that you probably haven’t thought of before, or a new slant on real estate, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in nine states. This program will help you follow in Jason’s footsteps on the road to financial freedom through real estate. You really can do it. And now, here’s your host, Jason Hartman.
Jason Hartman: Thank you for joining us for another addition of Creating Wealth. This is Jason Hartman and I wanted to say welcome to some of our listeners from around the world, whether it be the U.S., Canada, United Kingdom, Australia, Japan, Netherlands, Philippines, Cutter, Ireland, Singapore, India, Korea, Malaysia, Netherlands, Brazil, Germany, China, Switzerland, Thailand, and a total of 26 countries total. We appreciate having all of you listening and talking about investing in real estate, mostly in America, but a little bit around the world. American real estate we still think is really one of the best deals going, especially given this perfect storm that has developed over the past two years or so with the subprime mortgage meltdown, the rising commodity prices, and the ridiculous increase in inflation here in the U.S. and also globally.
Listen in to this first segment. It is from a radio broadcast of Paul Harvey. Now U.S. listeners will certainly know who Paul Harvey is. He’s been around just about forever, almost since the beginning of radio. Well, not quite, but been around a long time and he’s talking about here – I just found this interesting, so that’s why we want to share it with you – it’s a very short one-minute clip and he’s talking about how people showed up to church and found the churches topless. Yes, the roof was stolen because of the value of the commodities. And then he’s going to talk about how these precious metal scavengers are dismantling the exhaust systems of cars because, of course, there are a lot of precious metals, platinum and palladium, used in catalytic converters.
And this goes to our whole point that we’ve been talking about on prior shows, where we were talking about packaged commodities investing. Again, the point here is to trade devaluing, fake, fiat money dollars, or whatever currency it happens to be from around the world that is constantly getting debased, trade it for real hard assets as quickly as possible.
But don’t do it with pure commodities because the second part of this podcast, we’re going to listen to Jim Rogers, who’s one of my very favorite authors. I really like some of his stuff. Many years ago, I went through his book, Adventure Capitalists, and then he also wrote another one called, Investment Biker, where he traveled around the world two times on different occasions and talked about the financial markets in different parts of the world. Fascinating stuff and he’s really bullish on commodities, but again, we don’t recommend investing in the commodities directly. We like buying them in the form of properties because when we buy the commodities directly, we don’t get the special unique things we get when we buy them packaged as a property with improvements on the land.
We’ve talked about this many times before. I think you’ll really like these. I won’t have much to say during this show, but these news clips will be of interest to you. So let’s start off with the Paul Harvey radio news clip and then we will go to Jim Rogers, and I’ll have some commentary in between.
Paul Harvey: More than a thousand British churchgoers went to church this year and could not get in. They showed up to discover their beautiful heritage buildings were topless. The roof was gone. Hundreds such this year, just this year, because prices are so high for copper and lead, just in Sheffield and now even in Manchester, dozens of churches have been unroofed overnight this year.
Often the thieves return to the same church again and again. Scrap metal thieves are even more creative in Chicago. Scavenging for scrap metal, thieves are sneaking under parked cars, hacking into exhaust systems, cutting off the catalytic converters, but it’s the junk inside the converters that yielding trace metals, palladium, platinum, rhodium. Thousands of dollars an ounce on the black market.
Jason Hartman: Now, let’s listen to Jim Rogers, who is a real commodities guru and a commodities bull, and you know what? I think he’s right. The only spin I want to give this for you is to just ask you to think about it in a new way because he sounds very pessimistic about the American dollar and I am in total agreement with him about that. However, he looks at it as bad news, but I look at it as very good news for us real estate investors who are investing in very low, cheap land values and high commodities values. So let’s listen in. I’ll make a couple comments in between.
Talk Snow Host (Geri): Welcome, Jim Rogers. Thanks for being with me on this show.
Jim Rogers: I am delighted to be here, Geri.
Talk Snow Host (Geri): Great. Jim, you’ve written a book that’s due to be released this December 4, called A Bull in China, Investing Profitably in the World’s Greatest Market. You’ve taken your money out of the dollar and put it in Chinese Yuan, Japanese yen, and Swiss francs. And you packed up your family and moved to Singapore? Why don’t you explain to the folks out there what on earth is going on and why you’ve taken all these steps?
Jim Rogers: Well, we moved to Asia because I have a 4-year-old daughter who speaks Chinese and I wanna make sure she continues to speak good Mandarin and good Chinese. I think the best skill which I can give to someone born in 2003 is to be completely fluent in the Chinese language and in things Chinese. We’ve been thinking about this for some time. It’s not something that just popped into our minds recently. We’ve been looking at it for three or four years. Finally, we found the right place, the right schools, the right everything else. Plus, we do want to be in Asia. Asia’s the wave of the future. I think, Geri, that moving to Asia in 2007 will be like moving to London in 1907 or to New York – sorry, to London in 1807 or New York in 1907, so it’s just all come together and we moved here.
We’ve – when I told somebody that recently, they said, well, where are you putting your money, into which currencies, and I was explaining that I think that the renminbi is probably one of the soundest investments one can make these days. And they said what else, and I said Japanese yen and the Swiss franc. Both currencies are undervalued. They’ve been beaten down by the cherry trade, so I’ve been making new investments in those currencies.
I’m terribly, terribly pessimistic about the U.S. dollar. It grieves me to say this since I’m an American and we’re all Americans, my daughter, my wife, everybody, but what they’re doing to the U.S. dollar in America just breaks my heart. I can’t sit around and just watch them destroy the currency. I’ve gotta protect my family; I’ve gotta protect my daughter, my wife.
Jason Hartman: This is actually great news for us as real estate investors. Why? Think about it. The value of our loans keeps declining. Let them debase the American dollar. Overall, it is not great news, but as we play the game properly, we are outsmarting the Federal Reserve and the way the government is spending so ridiculously, irresponsibly because our investments increase in value with these inflationary pressures. The commodities inside them increase in value with the inflationary pressures, and the loan balances decline due to inflation.
Remember, as I’ve always told you, inflation hurts a lender and benefits a borrower. And then you add the real icing on the cake to this whole equation, which is already so incredibly good, and what is that icing on the cake? It is the fact that our tenants pay our debts for us. Wow. You can’t get that anywhere else, but in real estate investing. Let’s keep on listening to Jim Rogers.
Talk Show Host (Geri): Well, for a big part of the 20th Century, the U.S. dollar was the reserve currency of the world. What do you foresee as the fate of the dollar being the reserve currency?
Jim Rogers: Well, unfortunately, I’m afraid the dollar’s gonna lose its status as the world’s reserve currency. As recently as 1987, Geri, with the U.S. was a creditor nation. Now, we’re the largest debtor nation the world has ever seen. We owe the rest of the world over $13 trillion U.S. dollars, which is pretty terrifying, but what’s even worse is our foreign debts are increasing at the rate of $1 trillion U.S. every 15 months.
Now, in Washington, you’d think they’d be worried about this, but they don’t seem to be. It’s the official policy of the Federal Reserve of the United States to debase the currency. The head of the Central Bank is on official record as saying as he’s going to print as much money as he has to to drive down the value of the currency, and he’s doing it. I mean he cut interest rates twice here in the last two months. He’s sending signals to the rest of the world. He doesn’t care about the dollar. He’s printing money as fast as he can.
I mean this is a terrible policy. It’s never worked in the long term or the medium term with all of the countries that have tried it, but this is a man who doesn’t know much about the currency markets; he doesn’t know much about anything as far as I can see, except printing money. He spent his whole career studying printing money and now we’ve given him the printing presses and he’s running them. So it’s not good for the world, not good for America, but one has to adapt. One can’t sit here and watch him destroy the currency and take my family down with it.
Jason Hartman: Well, my comment there is the only way Jim Rogers or anybody else’s family would be taken down with it, as he puts it, is if they save a lot of money. If they have a lot of equity in real estate, if they have a lot of money denominated in dollars in any investment, stocks, bonds – and bonds are particularly bad; I would really shy away from bonds. I’m not a fan of bonds whatsoever. But stocks, bonds, equity in real estate, savings accounts, all of these items get attacked relentlessly by the devaluation of the dollar and by inflation.
But guess what? So does debt. I mean think about it. When you borrow money, your lender is essentially investing in a way in a bond. A bond that you hold and that you’re responsible for paying back. And guess what? They get paid back in constantly devaluing dollars. This is great news for us when we play the game correctly. Let’s keep on listening.
Talk Show Host (Geri): Well, what would be the significance of the world moving from an American dollar to its other currency as reserve currency? What is that going to do to the United States?
Jim Rogers: Well, this happened to the pound sterling 60 or 70, 60 – 80 years ago. The world moved away from the pound sterling to the U.S. dollar and England was in terrible shape for many, many years. They couldn’t borrow as much money as they wanted to. In fact, there came a time when no one would lend any money to the U.K. after a few – several years, many years, I should say. So it will happen to us. One of the great advantages the U.S. has is we can print money and borrow money in U.S. dollars and it’s been the world’s reserve currency. But as that changes, we’re going to find ourselves terribly restrained again. I’m not happy about any of this, Geri. I wish it weren’t happening, but those people in Washington don’t seem to see the world the way I do.
Jason Hartman: Now, that comment may sound really, really negative and really bad, but I, personally, am not very worried about it for a couple of reasons. No. 1, and I’ve explained this before on prior shows, remember America’s brand. America’s brand is freedom, stability, and the world’s Brinks truck, the world’s safe harbor, so that takes a very, very long time to change, even with the currency devaluation. America has by far the largest economy on Earth, much larger than China, much larger than other economies. But we are benefiting from the consumption of the other growing economies around the world as long as we get out of dollars and we take as many of those dollars as possible and we put them into hard assets. Things.
You know my mom used to always tell me when I was a kid that I spent money like it was going out of style. Well, guess what, Mom? Money is going out of style. But we don’t want to spend it on consumer items. We want to invest it in hard assets, in things everybody needs. Housing has universal need. Real estate has universal need, and the commodities, the ingredients of these properties that we buy, because we’re really buying very little land there, we’re buying mostly the value of the commodities that will continue to increase because of inflation and world consumption, as we are in the midst of a global prosperity boom.
Even if the global economy slows quite a bit, we are still historically speaking, in the midst of a boom when you look at it in the context of history over the past several decades. So this is all good news for us as long as we play the game right.
Talk Show Host (Geri): Are you getting any push back from basically telling the truth about what’s going on in the financial world?
Jim Rogers: To my astonishment, many people have written and said, my goodness, we wish somebody else would go public with what’s happening because it is a serious problem. I have gotten a couple of hate mails saying taking your money and stay out of the country. I didn’t realize America was like North Korea. These people seem to think you can’t live in America if you think things are wrong. But no, for the most part, to my amazement, everybody seems to say yes, good Lord, they are ruining things and I hope somebody will do something about it.
Talk Show Host (Geri): Have you been warning about this for very long?
Jim Rogers: Oh, yes, yes, it’s been something that’s been coming for a while. I’m afraid it crescendo-ing now, as Bernanke makes it clear to the rest of the world that he doesn’t care about the dollar. I mean this is something that if you would’ve paid attention, you would understand, but in the last three or four months, it’s become very clear when Bernanke went and cut interest rates recently to protect his friends on Wall Street rather than to protect the dollar. It’s been very, very clear to everybody. Not to everybody in the world, obviously, but too many people in the world.
Talk Show Host (Geri): Well, one thing I remember is seeing you every Saturday morning on the Fox News Channel on the financial shows and your position always seemed contrarian compared to some of those youngsters that were on the show and do you think that the things that you used to say on that show are becoming true and that the young ones on that show are starting to learn their lessons?
Jim Rogers: Well, it’s clear the things I said on the show are coming true. There’s not a question of thinking it or anything. That’s not an opinion. That’s happening. Are they learning? No, of course not. Most people on that show and on other shows like that still don’t seem to have much understanding of the big picture either, for certainly of international finance or world finance. As unfortunate as this is, many people are gonna have to pay the price. I’ve tried to explain this to people, but people don’t seem to wanna listen, which is fine. It just gives more opportunity for those who do understand to do something about it now. In case I’m wrong, then I’ll lose a lot of money, but I don’t think I’m gonna. So far I’ve been right.
Talk Show Host (Geri): Well, I mean when I watch all the financial shows now, Jim Cramer, all those, to me, it seems that they’re almost diluted about what’s happening to the dollar and about what the Federal Reserve should do because they seem to be thinking that more liquidity should be pumped into the system, especially that Jim Cramer, the host of that show.
Jim Rogers: I don’t watch shows like that, so I can’t help you on what they think, but it is clear that more liquidity is going to drive down the value of the dollar. It is happening. The dollar is at all-time lows now, but this is 2007, so that means in at least 100 years, the dollar’s now making new lows, which is a shame because we were the world’s reserve currency, we were the richest, most powerful country in the world, and it’s not going to be good. It’s driving commodity prices up; it’s driving up interest rates, as you know. Long-term interest rates have not come down in spite of all this, and what happened is as commodities go higher, inflation goes higher, imported goods go higher, inflation will get worse and ultimately, long-term interest rates will go higher, too. We already have a very, very steep yield curve in America because of long term interest rates are not paying attention to what the Federal Reserve is doing.
So in the end, if I’m right, this is going to cause problems for all of us, worse problems for all of us.
Talk Show Host (Geri): I’m back with Jim Rogers and we’re talking about the financial state of the United States right now and Jim, I’ve heard that you’ve endorsed Ron Paul for Presidency. Is that correct?
Jim Rogers: Well, I certainly said in TV that he’s the only one who seems to understand what’s going on and I’ve given money to Ron Paul. I’ve not given money to anybody else. He is the only one who has a clue what’s happening in America right now. He’s been the only one for a while. He seems to be getting traction and I hope he does. I would certainly vote for him if he gets a nomination. I would not vote for any of those other clowns, that’s for sure. I’d vote the protest vote before I would vote for them.
Talk Show Host (Geri): Well, he’s the only one I’ve noticed that’s been talking about currency and about the bubble, and the only other candidate I’ve heard talk about currency was Duncan Hunter who wanted to make it a trade violation for the Chinese to take their Yuan for the dollar, so that’s the only other candidate that I’ve even heard mention currency. But I’ve been following Ron Paul for decades and I know that he’s been warning us for years about the real estate bubble and the dangers of the government subsidized loans through Fanny Mae and Freddy Mac. And do you agree with him that the chickens are coming home to roost with regards to the real estate bubble?
Jim Rogers: That’s what you and I have been discussing here. Yes, of course, it is. He’s been exactly right. Again, none of the other clowns have had a clue what’s going on, part of the problem, rather than part of the solution. But no, most of the things that Ron has said over the years have turned out to be right.
Talk Show Host (Geri): Well, what needs to be done about the credit bubble?
Jim Rogers: Well, you’ve gotta pop it. It is being popped on its own accord right now. We’ve had the worst credit bubble we’ve had in American history, perhaps in world history. Never before in American history have people been able to buy a house with no money down, and in some cases, the builders would even front them money to help them buy a house. So this credit bubble’s got a long way to go as far as cleaning out the system. You don’t clean out a big credit bubble like we’ve had in five or six months. It usually takes several years to clean out a bubble like this and this one will, too.
In my view, what they should’ve been doing, they should have been raising interest rates, the Federal Reserve. That’s the way you go ahead and clean out the system. We’ve got an inflation problem. You raise interest rates, it might help with the inflation problem. The Japanese tried this when they started having problems in the early ‘90s and they kept putting on band-aids, putting on band-aids, putting on band-aids, and here it is 17 years later and their stock market is still down 70 percent. That’s 70 percent from where it was in 1990.
Well, America seems to be doing the same thing. We’re gonna cut interest rates; we’re gonna try to prop things up, and in the end, it’s going to make things much, much worse and much worse. Now, if you went ahead and raised interest rates and cleaned out the system and got the paying-behinders, then perhaps we could go ahead and start over again. There are lots of safety nets in America to take care of people when there are recessions or when there are hard times. Trying to prolong it with a bunch of band-aids and printing a lot of money is just going to lead to many, many, many worse problems down the road. If we went ahead and tried to take our medicine now, we might be better off down the road.
Talk Show Host (Geri): Well, with the subprime meltdown, instead the Fed has been injecting money into the system and claiming that that’s going to help the homeowners who are at risk to lose their homes because of the problems with the mortgages. Who does this really help? Who really benefits? The homeowners?
Jim Rogers: It’s helps the few firms on Wall Street that perhaps wouldn’t lose money on all the loans that they made, but most of the homeowners are not gonna benefit from this because there is a huge glut of housing in America. Cutting the interest rates is not going to get rid of the glut of housing. It’s not going to make house prices go up. It may save a few homeowners, but for the most part, the people who bought homes and were over-extended, shouldn’t have been buying homes in the first place.
As I said, never before in American history could you buy homes with no money down and everybody, of course, was buying very low – getting low interest rate mortgages that have to be reset. Well, they’re now being reset and even if he cuts interest rates another half or 1 percent or something, still many of these mortgages are going to be reset at higher rates.
And any people who have gone underwater with their house prices now, where the prices have gone down so much, they don’t have a profit anymore, are probably gonna walk away from their mortgages anyway. So this is not gonna help anybody except a few friends on Wall Street.
Talk Show Host (Geri): Well, and President Bush, I mean one of the things that he touted during his administration was the fact that the number of homeowners, people who own their own homes, was raising as if this was something that should be celebrated, when really, it was not a result of people earning the money and accumulating the wealth to buy houses that was just easy credit. Isn’t that right?
Jim Rogers: Well, again, whatever happens, all of these are leading to further and further long term problems. Politicians look for short term solutions because they’re not gonna be around in the long term. Somebody else is gonna be the politician. Short term band-aids have never worked eventually, and I’ve got a 4-year-old and I’m more worried about the 4-year-old than I am worried about the next election.
Talk Show Host (Geri): Well, yeah, and though it seems to me that politicians like to manipulate the system and then demagogue about it, and the easy credit has been one way for them to do that.
Jim Rogers: It certainly has and the politicians love to talk about how everybody can own a home, etc, etc. Well, you have to have economic reality. It’s great for everybody to own their own home. I’m all for it, too, but I’m also in favor of economic reality because eventually somebody has to pay all these bills.
Talk Show Host (Geri): One thing I wanna do is play a little sound clip from Ron Paul questioning Bernanke earlier this week, and then just get a few comments about it.
Jim Rogers: Okay.
Talk Show Host (Geri): It’s about two and a half minutes, if that’s okay with you.
Jim Rogers: That’s fine, yeah.
Talk Show Host (Geri): Okay, John, would you go ahead and play that?
Ron Paul: So I think we have to get back to the very fundamentals of where this problem comes from and the bubbles occur when we have this mal-investment and the creation of new money. So my question boils down to this. How in the world can we expect to solve the problems of inflation, that is, the increase in the supply of money, with more inflation?
Ben Bernanke: Well, Congressman, first, there’s a small technical point on the growth in money. Money growth has been pretty moderate over the last few years. The increase in MZM is probably related to the financial turmoil. People have been taking their savings out of risky assets, putting them in the bank, and that makes the money data show faster growth. So I’m not sure that’s indicative of policy necessarily.
What we’re trying to do is follow the mandate that Congress gave us and the mandate that Congress gave us is to look at employment and inflation as measured by domestic price growth, and as I talked about today, and I think you would agree, that we do see risk to inflation and we are taking those into account and we wanna make sure that prices remain as stable as possible in the United States.
Ron Paul: How can you do this and pursue this, the policy you have, without further weakening the dollar? There’s a dollar crisis out there and people’s money is being stolen. People who have saved, they’re being robbed. I mean if you have devaluation of the dollar at 10 percent, people have been robbed of 10 percent. But how can you pursue this policy without addressing the subject that somebody’s losing their wealth because of the weaker dollar and it’s gonna lead to higher interest rates and a weaker economy?
Ben Bernanke: If somebody has their wealth in dollars and they’re gonna buy consumer goods in dollars, as the typical American, then the decline in the dollar, the only effect it has on their buying power is it makes imported goods more expensive.
Ron Paul: Yeah, but not if you’re retired and elderly, and you have CDs and their cost of living is going up no matter what your CPI says, their cost of living is going up and they’re hurting, and that’s why people in this country are very upset.
Jason Hartman: Well, if that isn’t telling, I don’t know what is. Ron Paul is absolutely right. Ben Bernanke is a liar, liar, liar. I mean can you believe that? Gee, only if you buy stuff that’s imported, will you be affected by this. That is so untrue. We live in a global economy and the ingredients to almost everything you could possibly buy, whether it be at the grocery store, the electronics store, services, because think about it. Service people have to buy stuff, too. There’s this ripple effect. Inflation is everywhere and the devaluation of the dollar is hurting the elderly the most because they tend to be the savers. They did the right thing all their life. They were told save money, save for retirement, yet they have been totally burned through the policies of the Federal Reserve.
What can we do about it? Well, the best thing we can do is not get burnt. So follow our plan. Use debt, trade dollars for hard commodities that are likely to increase in value, put tenants in the properties so the tenants pay the debt back for you in depreciating dollars. That is a very, very good deal. Keep on listening.
Talk Show Host (Geri): Well, first of all, Jim, what did you think of Bernanke’s response to Ron Paul’s question with regard to the growth of the money supply?
Jim Rogers: Well, we know he’s lying. I mean the statistics are pretty clear that they have been printing money, that M3, they stopped reporting M3 a year and a half or so ago so that people wouldn’t know, but there are people who have been able to reconstruct M3 and M3 is rising at a very rapid rate. The government has been – the Central Bank has been printing a lot of money since Bernanke showed up.
But, by the way, they were printing a lot of money under Greenspan, too. Greenspan and Bernanke together have really, really, really undermined the value of the dollar. What is really terrifying, from what I heard Bernanke say, though, is when he started talking about how the collapse of the dollar or the fall of the dollar does not affect Americans who buy products. That is grounds for impeachment if you ask me because that is such an untrue and inaccurate statement. How can a man, who claims to be an economist and the head of Central Bank, try to get away with that? I mean he’s either lying or he’s a total charlatan, one or the other, because everybody’s affected when the dollar goes down.
Copper goes up; Scotch whiskey goes up, cars go up, tires go up, everything goes higher. If the price of imported tires goes up, that means the price of domestic prices are gonna go up, too. So even if I only buy U.S. tires and all the foreign tires coming into the country are higher priced, the domestic people are gonna raise their prices, too. So I mean it was terrifying to hear him say that, and I don’t know if he really believes it. If so, then he’s a fool. And if he doesn’t believe and he knows he’s telling a lie, then he’s a charlatan and should be impeached because that was such an extraordinary, extraordinary statement to hear that from anybody, except somebody that doesn’t know what they’re talking about.
When the dollar goes down, it affects all of us. Even if we only buy American products, it affects you dramatically. And again, even if you don’t buy foreign tires, American tires are gonna go up because the price of rubber’s gonna go up, the price of everything is gonna go higher as the dollar goes down. So I mean I was shocked and terrified when I heard the man say that.
Talk Show Host (Geri): Well, I wouldn’t put it past them to give the big lie over and over again. I mean if they’re capable of manipulating inflation where inflation exists, to me, they’re capable of anything.
Jim, we’re back and we’re gonna talk some more about Bernanke’s presentation and his responses to Ron Paul’s questions. I’d like you to explain a little bit more to the folks out there who may not understand about M3 and how they manipulate the consumer price index because I keep seeing these comments on blogs and in articles criticizing Ron Paul for claiming that there’s inflation because they say that inflation’s at 2.5 percent. What do you have to say about that?
Jim Rogers: Well, you know, I’d like to know where the people shop who say that inflation’s 2.5 percent because the price of everything is going up, Geri. No matter what you look at, if you look at entertainment or education or healthcare, gasoline, utilities, insurance; everything is going up and so people who say that inflation is 2.5 percent just aren’t with it. Now the government says that, but the government we know is lying to us. The government used to say, they used to acknowledge that they hedonically adjust prices. It used to be on their website, the Bureau of the Labor Statistics, that they would hedonically adjust things.
Talk Show Host (Geri): What does that mean?
Jim Rogers: Well, Geri, you know what hedonism is. I mean hedonism is when they’re trying to show us a good time, so they’re manipulating the numbers and misleading us, but more and more people are catching on that inflation’s not 2.5 percent. I mean inflation’s going through the roof, despite what the government says.
Jason Hartman: Well, as much of a Jim Rogers fan as I am, that was a pretty lame explanation of hedonics. Basically, as we’ve talked about on prior shows, the government messes with inflation and they lie to us about inflation in several ways. One of them is through a methodology called hedonics, and we’ve gone into this in much more detail on prior shows, so you can look back at the show notes and listen to those. But just to give you a quick summary here, hedonics is where they say that the product you’re buying, that the consumer is buying, produces the equal or greater amount of pleasure, if you will, than the older products. So the newer product is better because of progress and technology, as it should be. And that newer product should be adjusted for inflation through the hedonics index.
So for example, if you were to buy a laptop computer today, of course, that computer is more powerful and pretty much better in every way, than it was 10 years ago. And it may even be less expensive today. But they don’t just say that that computer is less expensive, they say that if you were to buy an equal computer, which isn’t even produced today anymore, to the one you would have purchased 10 years ago, what would that price be today.
Well, they don’t produce it, first of all. I mean I remember back in 1989, I bought my first computer. It was a Compaq SLT 286 and it was a 14-pound lunchbox style computer, and it had a tiny little screen and a DOS operating system and I remember the big decision was should I get a 20 Mb, megabyte, not 20 gigs, but 20 Mb hard drive, or should I get the 40 Mb hard drive. Well, I couldn’t imagine any reason I would ever need a 40 Mb hard drive and now, of course, I have a 200 gig hard drive in my Mac Book Pro. So obviously, we use that space and it was an SLT 286. It was a very slow computer by today’s standards and it cost $4,200.00 back in 1989.
Now, such a computer doesn’t even exist. No one produces that computer today. But what they would do is compare today’s processing power with the processing power back in 1989 and hedonically adjust it. This does not hold true in real life, and the reason it does not hold true is because I can’t buy that old computer. And even if I could, it wouldn’t work because it wouldn’t be compatible with anything else. I couldn’t use the internet, I couldn’t use email. That technology would not be useful to me today.
So the fact is I have to pay more, even though I get a better product, that’s true, but folks, isn’t that the point? Don’t we have the right as consumers to expect progress? I mean progress has happened since the beginning of time and we should expect the progress benefit to accrue to us without the government manipulating the numbers to hide inflation. So that’s a brief explanation of hedonics. If you want a better explanation, go listen to the old shows at www.jasonhartman.com and there’s much more to it there.
Anyway, we’re about to wrap up here, so keep on listening for another couple minutes.
Talk Show Host (Geri): Well, let’s end the segment talking about your new book, A Bull in China: Investing Profitably in the World’s Greatest Market and that’s what you’ve been doing, isn’t it? Investing profitably in China?
Jim Rogers: I do have investments in China. I’ve had them for a long, long time. I cannot buy Chinese shares right now because the market’s gone through the roof, but my book is not a book of hot tips. It’s a book about what’s going on in China if you want to invest in China. There are various ways to do it, real estate, the currency, stocks. One of the best ways, of course, is to buy commodities because the Chinese have to buy commodities and they’re going to buy more commodities. So there are plenty of ways to invest in China. I do a few case studies of a few industries to help people figure out what’s going on, and then if people decide they wanna invest in China, I’ve given them some ways to do it.
Talk Show Host (Geri): Well, let’s talk about commodity investing because I believe that I read that you are saying that the stock market in the United States is not gonna come back for quite a long time and we’re in for a rough ride, and you recommend, at this point, investing in commodities. Is that right?
Jim Rogers: Well, I’d rather be in commodities than in stocks. I do own stocks in America. I mean I have some things I’ve owned for 20 or 30 years. I don’t sell them just because the market may or may not go down for a while. But I think that the best place where people should have money now is either in sound foreign currencies or in real assets, such as commodities. I’ve been buying more agricultural commodities recently because I think that’s a better place for people to have money than in stocks. Certainly better than in investment banks on Wall Street, which I’ve sold short.
Talk Show Host (Geri): Well, what is it about agriculture that you think is a good place to be. I mean one thing that I’ve been reading is there’s less farm land in the United States, and perhaps that’s true throughout the world, but why agriculture?
Jim Rogers: Well, a number of acres devoted to wheat farming has been declining for 30 years. The inventories of food are the lowest levels they’ve been since 1972. There are a lot of positive things taking place in the United States, in the world, positive for agriculture. Less and less land is available for growing crops and now, of course, we have ethanol and biofuels, and because of biofuels, more and more agricultural products will be burned in gas tanks. So you’re gonna have greater demand for agriculture and less supply, and that normally means a bull market when supply is going down and demand is going up.
Talk Show Host (Geri): And do you also subscribe to the peak oil theory? Are you investing in oil as well because of the possibility that the peak oil theory is correct?
Jim Rogers: Well, I have in my last book, Hot Commodities, I talked about the oil and what’s happening with oil. Geri, I have no way of knowing if there’s peak oil out there. I’m not a geologist and even if I were, how can I cover the whole world looking to see if there’s any possible oil?
But I do know that nobody has discovered a gigantic elephant oil field in over 40 years. I do know that every oil company in the world has declining reserves. I do know that nearly every oil country in the world has declining reserves. So maybe there’s gigantic amounts of oil left out there, but if so, we don’t know where it is and we’ve gotta find it very quickly and in very accessible areas or the surprise is going to be how high the price of oil stays and how high it goes. Maybe there are billions and billions of oil left, but we don’t know where they are.
Talk Show Host (Geri): Well, I’ll tell you, my father’s a retired petroleum engineer and he strongly believes in the Hubert’s Peak and peak oil, so you might be on to something there.
Jim Rogers: It doesn’t matter. So far, the evidence is that he’s correct, but it really doesn’t matter, Geri, unless somebody finds it. Let’s say it’s there. Where is it? We gotta find it very quickly and if we don’t, the price of oil’s gonna continue to go higher.
Talk Show Host (Geri): Exactly.
Jim Rogers: So far your father and Hubert have been – King Hubert have been completely correct.
Talk Show Host (Geri): Well, another thing I wanna talk to you about is China because as you know, there are social conservatives in our country that don’t wanna have trade with China because they perceive China as communist and Godless and immoral. What have you observed about China since you’ve actually been there and have seen the markets opening up? What do you think about the level of freedom and modernization in China?
Jim Rogers: Geri, they call themselves communists, but I’m telling you, they’re among the best capitalists in the world right now. Massachusetts is more communist than China is. I mean try to do business is Massachusetts, try to do business in China, I promise you, most people would accept China. You will also find that there are lots and lots of right now. I mean there are 100s of magazines and newspapers in China. Thirty years ago, of course, when the hard line communists were running it, there was only one newspaper. There are lots of TV stations now, the internet. There are tens of millions, scores of millions of people in China on the internet now. I mean it’s virtually impossible to censor people, even if you want to. There is some attempted censorship, of course.
But I’ve driven across China a few times. The churches, the mosques, the temples are all packed with people now. They certainly aren’t Godless. Maybe they were Godless officially 40 years ago, but they’re not anymore. No, there are dramatic and massive changes taking place in China. Are there problems? Of course. There are and will be huge problems, just as there were in America 150 years ago, 125 years ago. We had terrible problems and horrible setbacks, but we did a pretty good job. And they’re in the process of doing a pretty good job.
Talk Show Host (Geri): Well, Jim Rogers, I really wanna thank you for being with me for this interview. It’s very interesting and I’m gonna recommend that everybody go buy your new book, A Bull in China: Investing Profitably in the World’s Greatest Market. Thank you very much for being with me.
Jim Rogers: Very good. Thank you, Geri.
Jason Hartman: Well, that was it. You know, a long time ago, one of my real estate mentors, Robert Allen, who’s written several best selling books, said don’t wait to buy real estate. Buy real estate and then wait. And you know what? That is very true. But you’ve gotta buy a special kind of real estate, financed a special way, in the right markets, at the right time, based on our methodology. Jim Rogers is right. The value of commodities will continue to increase. They’ve already had quite a run, but there is a global prosperity boom occurring that is of historical proportions, something that has never before happened in human history. This is a game changer. It is a life changer. The world will never be the same again because of it.
You combine that with the fact that post-1971 world, where the government started aggressively devaluing our currency in the U.S. Good news for us as long as we’re following the right plan; bad news for us if we’re following the old plan, which does not work anymore. Follow my plan because it makes sense based on the current environment we are in.
So I hope this was helpful to you. This information is crucial to your financial future. Use it. Call one of our investment counselors here. Inquire at our website at www.jasonhartman.com. Go to www.jasonhartman.com and get the free CD. Attend one of our events coming up and we will look forward to helping you grow your wealth based on the new world in which we live. It is a different world, but it is still a world of abundant and truly incredible, incredible opportunities to create wealth if you do it the right way and you follow the right roadmap. So with that, thank you so much for listening and happy investing.
I’m here with Area Manager, Karam and if you’re looking for positive cash flow – yes, you can actually do that with only 10 percent down. Quite an amazing deal to do in today’s market and remember: the interest rates are getting a lot lower right now, so it’s a good time to be locking them in so that you lock in your cost of borrowing for the next three decades. Karam, tell us about positive cash flow and rent guarantees in Columbus, Ohio.
Karam: Well, Columbus, Ohio, we have a builder who is very, very creative. What he did was he went ahead on all these brand new single-family houses, townhouses, and condos. He’s guaranteeing six-month rent. Not only that, he is going to pay our investors the homeowners association fee and the management fee for two years. And what that does is, with 10 percent down, you get anywhere from $100.00 – $200.00 positive income before even the tax benefit is considered.
Jason Hartman: Wow, that is really phenomenal. That’s gotta be one of our very best markets in terms of cash flow, so excellent. Anything else you wanna say about Columbus, in general?
Karam: Well, the economy is booming there. There are several major corporations headquartered there. University is big, so a smart workforce, low cost of living. That attracts a lot of investors there.
Jason Hartman: Okay, Karam thanks for updating us on Columbus, Ohio. Great market.
Karam: You’re welcome, Jason.
Jason Hartman: Hey, I just wanted to announce a couple of quick things for you. If you are able to come to one of our live events, we would love to see you and meet you in person. We’ve had people fly in from all over the U.S. for them.
As you know, we are all moving on the first week of March to our beautiful new office in Costa Mesa right near the world renowned South Coast Plaza, and you know, we have got to hold a Creating Wealth 202 event in March and our operations manager, Karen, is very upset that we’re doing it this weekend, but it will be Saturday, March 8. Yes, we may be in boxes, it may be kind of disorganized, but it will be in our beautiful new office, so be sure to join us for Creating Wealth 202 on Saturday, March 8. Register at www.jasonhartman.com.
Join us for our Grand Opening celebration, celebrating our 11th year in business at the grand opening of our new office at 555 Anton in Costa Mesa. That will be Thursday evening, March 27, from 5:00 – 9:00 p.m. and be sure to register. You must register for this party in advance. It’s free of charge, of course, but we need to know you’re coming so we can tell the caterers to provide for you. So go to www.jasonhartman.com and R.S.V.P. for the party on the website please.
We have a very special event coming up. It is our Master’s Weekend. It is on March 29 and 30, that’s a Saturday and Sunday, the Master’s Weekend. We only hold this event, so far, once every year, so it is a very, very special event. And last year, it was just exceptional. People loved it and we flew in 16 experts from all over the country on every topic under the sun regarding investments and finance and real estate, from property managers to area agents and brokers and builders, and asset protection techniques and tax savings techniques, and wealth creation techniques; and how to use the software to manage your properties and be organized in your real estate business, and just a whole bunch of great things.
I’ve got Karen and Karam here in the room with me to just comment on the Master’s Weekend. Karen, you want to say anything about it?
Karen Karanickolas: Yes, I’m very much looking forward to the Master’s Weekend. We’ll have some great food for everybody. We’ll provide you several meals throughout the weekend. And also, I’m looking forward to giving you a presentation on getting your business organized because once you start acquiring these properties, it does become a business, so I’m here to help you. And I’m looking forward to giving you an overview of getting your business organized.
Jason Hartman: All right, Karam, what do you have to say about the Master’s Weekend?
Karam: Well, last Master’s Weekend was a great success and this time, even it will be better. And for our clients who have already purchased the properties, investment properties nationwide, you will be meeting one on one with all these agents and property managers that you have been dealing with. Now, you can put a face to it. And for our clients who are going to be purchasing, there will be a lot of questions answered when you meet these people. They will have all the answers about the areas and it’s great to meet all these property managers and area agents who come with the flavor of their different areas.
Jason Hartman: That’s excellent. So that will be at our new office and Karen, another comment?
Karen Karanickolas: Yes, for all of you new investors, we will have some testimonials from our existing clients, from our previous clients who have purchased multiple properties. We will have a panel there available for you to hear their stories and ask them questions about your experiences as well.
Jason Hartman: Yeah, this is a great thing Karen’s talking about. We’ll have a panel of actual investors who have done it. They’ll show you the ups and downs and pitfalls, and how to avoid the pitfalls and make sure you maximize all of your investments. So join us for the Master’s Weekend. It’s at the end of March at our new office and register at www.jasonhartman.com, and we have experts flying in from all over the U.S. for this event. It’s really a big one-of-a-kind event. So hopefully you can join us for some of those events.
I wanted to mention to you that we have a new offering, a free CD, a free audio CD, that you will really, really like. We’ve had so many people that have given us really good comments about them, and you can go to our website at www.jasonhartman.com and just fill out a little quick web form and you can either download it or you can have the physical CD mailed to you in the postal mail. But get the free CD, especially if you are a new listener. You need this. And if you are a regular listener and you’ve listened to all the other old shows, you don’t need the CD so much, but it will be a nice review for you either way. But if you’re a new listener, you definitely want to go to www.jasonhartman.com and request the free CD.
Just wanna remind everybody listening that we are moving to our new office and you can find all that information on our website at www.jasonhartman.com.
Also, we just uploaded another video podcast and I’d highly recommend that you subscribe to that. There’s some stuff that just lends itself better to video than audio. If you want to see what’s on that, subscribe to it, you can go to www.jasonhartman.com. If you use iTunes or an iPod and you’re an Apple person, then you can go to the iTunes Store, type in Jason Hartman, and two podcasts will come up, the video podcast and the audio podcast. And you’re probably already, if you’re listening, a subscriber to the audio podcast, so make sure you get yourself a free subscription to the video podcast as well.
And this particular one that we just loaded in the video podcast is about Naked Short Sales and what goes on with this short sale and manipulation of the stock market. It’s a very interesting report from Bloomberg News and I think you’ll really learn a lot from that. So be sure to tune in and watch that.
Be sure to see appropriate disclaimers and disclosures on our website at www.jasonhartman.com. Remember that we are not tax or legal advisors.
Anyway, we’ll talk to you next week. Thanks for listening.
This material is the copyrighted creative work of either Jason Hartman, the Hartman Media Company, Platinum Properties Investor Network, Incorporated or the J. Hartman Company, all rights reserved.
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Duration: 53 minutes
