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The Empty Planet Model and Dan Amerman on Mortgages and the Fed

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Jason Hartman starts the podcast with in-house economic Thomas. They discuss a couple of population models- the UN population model and the Empty Planet Model. They look at a new phase of population growth and its impact on the world. In the second segment of the show, Jason hosts guest Dan Amerman, CFA, and author of books such as Mortgage Securities and Collateralized Mortgage Obligations: Unlock The Secrets Of Mortgage Derivatives. They talk about the Fed and its impact on inflation and housing. They end the discussion with the Fed setting interest rates.

Investor 0:00
So I got in interested in real estate investing, you know, I’m actually my backgrounds in finance and I. So I have a pretty strong background but more so in what’s been traditional investing. And it’s funny that we’ve been touting diversification for so long and it’s been like that mix of stocks and bonds and I really felt like after all this time preaching to others that you know, this should work for them. It wasn’t even working for myself and thought that I really need to venture out and you know, real estate investing just it, it definitely interested in me, it wasn’t something that I struggle with, but it was, you know, something that I don’t know I got excited about right away, it made sense to me. And so it’s more so of creating that team and you know, knowing how to go about it was my biggest challenge and figuring out because with traditional investing, you can figure out an ETF or mutual fund you do online Research. This took a lot more effort. And I know that I can do it solo I need to, to come up with a good team and a good approach. So I found Jason, I was listening to not his podcast, but one that he spoke on. And it was just at that time I was just trying to learn. I’m like, well, you sounded pretty smart. So I’m going to listen to his podcast. So, you know, I actually listened to his podcast well over a year. And then I would say, you know, I don’t know it was more so just thinking. I don’t know. It just seemed like it was interesting, not necessarily something that would be right for me. And then all of a sudden, everything clicked. And it was right for me to take the steps and really figure out what Jason is all about and, and the more the program and the see if it worked for me.

Announcer 1:48
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset. class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman 2:38
Welcome and thank you for joining me, this is your host Jason Hartman with Episode 1100 and 32 1132. And today we are going to talk about population and what it means for investors and what it means for the geopolitical climate around the world. Because you know what, you should have some big concerns about this and It’s not what you think I bet you think it’s something different than what we’re going to say. So we’ll be with you in a moment on that. But our guest today is Dan Ammerman. He’s back on the show. You’ve heard him on the show many times before. I know that several of you follow his work. And so we will be playing his episode in two parts today and tomorrow. Remember, of course, we’re five days a week now. We’ve got meet the masters of income property coming up, get your tickets at Jason Hartman comm slash masters Be sure to reserve your hotel room because our discount hotel room block rate for the Newport Beach Hotel, said a beautiful resort there is expiring soon so there really is some urgency to go ahead and get your hotel room reserved ASAP. You’ll get all the hotel information after you register for the event at Jason Hartman comm slash masters. I’ve got our in house economist Thomas young here with me, Thomas, welcome How you doing?

Thomas 3:59
I’m doing well. How are you?

Jason Hartman 4:00
Good. How are things at econometrics and Salt Lake City?

Thomas 4:03
Oh, life’s good.

Jason Hartman 4:06
Well, that’s an enthusiast. You’re not a very excitable guy. Are you, Thomas? Oh, yeah, I get.

Thomas 4:11
Okay, maybe sometimes not.

Jason Hartman 4:15
Well, in your line of work, maybe it’s good that you’re not too excitable, right? Because all of the ups and downs with the economy and all the crazy news out there, you are just about finished reading a new book that I can’t wait to read and I’m going to invite the author on to the show. The book is entitled empty planet. Now, Thomas, isn’t this the opposite of what every economist and every environmentalist and every Chicken Little The sky is falling person is saying empty planet. Are you saying we’re running out of people? I thought we had too many people. That’s what everybody’s been saying. What’s the story?

Thomas 4:55
Yeah, that’s the author’s point. If you believe the UN population will reach 9 billion by 2050. And then we may have 11 billion people by 2100. And then perhaps population will level off. That’s the UN model. The, the empty planet model is, you know, more nuanced.

Jason Hartman 5:18
Why does the UN make the prediction they make? And then what is the the nuanced prediction in the empty planet book?

Thomas 5:26
Yeah, so the UN model, it’s basically a continuation of what we’ve seen in stage four population growth. So they let me just go through the four population stages. The first stage is what we’ve had for most of human history where there was a high fluctuation, high birth rate and high death rates of population growth was relatively small. So at around one ad population was perhaps 300 million and it took another 1300 years to double the 600 million. You know, some of the reasons for that might be disease or famine, there was a high infant mortality rate, you know, things like that right stage to a high birth rate but a falling death rate this is this is the case that happened say from the 1870s to the early 20th century for saying England where there was a high birth rate but a falling death rate and not falling death rate was because of better nutrition. England was I think the first to implement what do you call those pipes that are going on going around underground sewers? Yeah, sewer system.

Jason Hartman 6:38
Yeah, that’s a good that’s a good invention. I like sewers. And, of course, everybody may know that the toilet was invented by john crapper. Literally. I’m not kidding. It looks That’s what I heard. I don’t know maybe I’m wrong about that. But I took that rumors that was true. So I don’t want to say it’s verified or I’ve studied it, but I just think it’s kind of funny. Okay, so soon. kept the population growing, right? They help the population grow because people aren’t dying of diseases much. And then mosquitoes have been a big deal. The invention of the mosquito net has been a major breakthrough in human history. And then, you know, of course simple things like window screens and things like that. So these darn people are dying. Isn’t that a huge problem? Huh?

Thomas 7:24
That was a What do you call it? The meth mafia? Susie? What is it? Yeah, the mafia z and the birth rate would stay high, but the death rate would go down. And so we’d have a Soylent moment we’re population was 80 billion and the world would fall apart.

Jason Hartman 7:40
Yeah, yeah. So referring to that 70s movie Soylent Green. Probably many of the listeners have seen it. If you haven’t, you know, I’m always telling you to watch old movies and old TV shows to get a feel for what life was like and pay most people listening. Were probably even alive when that movie came out. I know. I was, you know, but you really should. Watch a movie Soylent Green. You know, it’s it’s an interesting, apocalyptic. Look at how it supposed to be in I think New York City in 2020. And hey, that’s only two years away. So yeah, very interesting. Okay, so empty planet is saying the opposite of mellifluous. Is that what you’re telling us?

Thomas 8:19
Yeah, so stage two high birth rate falling death rate, then stage three, a falling birth rate and a continuing falling death rate. So most places around the world are seeing a falling birth rate and falling death rate. And then stage four is a low birth rate and a low death rate. But population growth is relatively small. And they make the case that really, most countries now are entering something that we’ve really never seen before, which is stage five of the demographic transition theory, which is, death rates, slightly exceed birth rates and populations start to decline. I think you might have more theories than I do about why the death rate would exceed the birth rate. But um, some theories that the authors throw out or there’s a rise in individualism, the family structure has become less important to an individual kid born today than it ever has been,

Jason Hartman 9:21
which is sad. It’s just a different world. And it’s amazing how quickly it changed. Now, as you know, George Gilder is speaking at meet the masters. He’s really an amazing intellectual and, and some people don’t know that he has written quite a bit about the impact of feminism on society and the family structure and population and so forth. You know, he’s not well liked by the National Organization for Women. Which is, frankly ridiculous. You know, he has some interesting theories about all that stuff. I haven’t studied That part of his work very closely. But it’s interesting, you know. And so this has a lot to do with, you know, what has happened to the culture and what has happened to the family. And it all basically leads to a population decline. Is that the point of the book?

Thomas 10:16
Yeah, that’s the idea is that in 30, and 30 years from now, population will peak maybe even sooner than then but population will peak. And by 2100, instead of having 11 billion people on the planet will will have maybe 7 billion, maybe 8 billion. So pretty much where we are today,

Jason Hartman 10:36
you know, that really does seem pretty likely unless there’s a major advancing longevity sciences, which by the way, I think there are some major advances coming up for that. But you know, if you look at a couple of major swaths of the planet, right, you take Japan, you take Russia, you take Western Europe. You take European Americans, okay? They’re not replacing themselves, these populations are all going extinct. The only reason that the United States population is growing is because of immigration. It’s not growing because of the European American, the sort of first settlers right after the American Indians, obviously. And so, you know, if you just take those components, you know, with fertility rates of like, 1.2, in replacement rate is 2.2. You go to Western Europe, and it’s like, everybody’s old, nobody’s having kids, you know, you go to Japan, and that country is just going extinct. You go to Russia, they’re going extinct. These are a couple of big components of the world, right. And so it seems like this is entirely possible, doesn’t it?

Thomas 11:50
Yeah. The authors give as an example, South Korea, where fertility rates are very low, and if current trends continue Then the population of South Korea will be zero by, it was still a couple centuries out. But you know, obviously, the population is not going to go to zero.

Jason Hartman 12:10
So there will be like, you know, one couple left in South Korea, they won’t have any kids and they’ll be trying to hold the borders down, right. Get a man imagine. Yeah, I haven’t studied South Korea. I didn’t really know what was going on there. I know Japan has always talked about, like Mark Stein says you can’t have a country without people. So you just look forward. And actually, what am I thinking? I didn’t even mentioned China. My gosh, huge impact right on this on this equation. So the one child policy that disastrous one child policy in China has led to a huge population decline problem that is coming up, and they’re going to start feeling that in about, I don’t know, 12 to 15 years. And then after that, it’s just a steady, steady decline, right.

Thomas 12:57
It’s interesting. I think most demographer thought that when China did away with that one child policy that everybody would have kids, everyone would start having more kids. And it hasn’t happened. The fertility rates still declining.

Jason Hartman 13:10
Yeah. You know, what is a fascinating book, the listeners have asked me to talk about my book list, right? I have not kept that up to date at all. But here, folks, I’m going to give you a recommendation for a fantastic book. And Thomas, maybe you’ve heard or read this one. It’s called the bet. And I’ve mentioned it before. It’s about Paul Ehrlich and Julian Simon and our gamble over the Earth’s future, right. The bet is just a fantastic book. It’s really interesting because it Chronicles these two thought leaders who had completely different worldviews about population. And you know, starting in maybe the late 70s, or I mean, the early 70s, or even the late 60s possibly, and how they were just duking it out. The media, you know, going around talking about their views on things, right. And so one was the mouth Museum, right? thought that, oh, you know, people gotta stop having sex because they’re having babies. And you know, it’s just going to be a disaster and all this kind of stuff. And it just shows you how the Mel fouzia and view of the world is just, it’s just a bankrupt ideology. It seems like it makes sense. But it’s very zero sum game oriented, because it views people as the cost or the problem, not as the resource that they really are. And people solve the world’s problems. They don’t, they certainly create some too, but ultimately, I have a lot of faith in humanity. And I think people solve problems. So when you have fewer people, you have fewer ideas, you have fewer problem solvers, that leads to problems. Now, of course, people need to be educated they need to contribute to society. They need to be motivated and ambitious and slackers don’t contribute much. So I’m assuming everybody will ultimately become a contributor to society, right in that equation, but, but the bed is a really interesting book, I’d highly recommend it. And now I can’t wait to read empty planet. You know, hopefully we’ll get the authors on the show. Anything else you want to tell us about the book? Or, you know, just your views on population in general? You know, what I haven’t asked you, Thomas is the magic question. What does it mean to the economy? What does it mean to real estate investors? What are your thoughts there?

Thomas 15:33
It means a lot. It’s hard to generate growth without population growth. You know, I was thinking how many homes there are in the so called developed world. So there’s 2.5 billion population and you assume about household size of around 3.1. Then you get around 900 million homes or places, I guess. I mean, I think demand would increase for higher end homes. population declines, but the lower end homes, you know, with populations declining, but the overall population that’s left has more money than that money goes somewhere and a part of it goes into higher end homes.

Jason Hartman 16:12
Right, right. Yeah, that’s certainly possible. Okay. So before we freak out all of our real estate investor listeners, let’s just kind of couch this in the proper light, hopefully. So first of all, what I have been saying for the last 15 years in talking to real estate investors about my beliefs about macro economic trends and population and so forth, is that my investment strategy very, very sound strategy. I think all our listeners will agree with that even if they hate my politics, they agree with my investment strategy, because I hear them telling me that all the time. But I have said many times, if we don’t have a stable or increasing population, all bets are off. In a population decline environment, all bets are off. Now. Here’s that that’s what we’re talking about today. Right. But here, you got to remember something. First off, Thomas talked about world population. And when we look at investments, we’re really only, you know, focused on the US market. Okay, so that’s one thing. But the other thing is that these trends are very far out from an investor time horizon perspective, we’re talking about, you know, the year 2100. Okay, so you got 82 years before that, right. So you don’t have to worry about this stuff too much in your lifetime listeners. Okay, but the long trend, I agree with it, I think we will see population certainly level off the wild card in this whole thing. You know, certainly we know that as people become more prosperous, they have fewer children that’s been proven over and over again. But the wild card here, Thomas is longevity. If there’s a real spike in longevity and people are living 10 2030 4050, you know, who knows, maybe 100 years longer, who knows who knows, these predictions will not come true at all right? But we just don’t know. Nobody knows.

Thomas 18:02
That’s a great thing about life.

Jason Hartman 18:04
Yeah. And there’s certainly a lot of advances in that. So listen to my longevity and biohacking show for more information there. Hey, Thomas, you know what we got to get to part one of our guest today, Dan Ammerman. Let’s have you back on later this week and talk a little bit more maybe we can wrap up on this. And I want to talk to you about minimum wage, the minimum wage effect on the economy, and we got to get into talking a little bit about retail sales and what that means for investors as well. Without further ado, let’s hear from part one of Dan Ammerman will have Part Two on tomorrow, here we go. Join us March 23, and 24th for the 2019 meet the masters of income property. Let’s break this down and look at some of the strengths of income property. As an asset class. I found that this event is really helpful because I am totally a newbie to real estate investment. And so

Thomas 18:53
I picked up so much information one

Jason Hartman 18:55
of the great things about it is that it’s so fragmented right? Embrace the fragmentation. actually been learning a lot about the tax benefits

Thomas 19:07
to real estate and a lot of I’ve been investing actually well over 10 years now. And I learned a lot of new things today.

Jason Hartman 19:15
The other advantage of this weekend is networking. Meeting new property managers meeting new area specialists and seeing the product they have to offer that changes here by you. Register now with Jason hartman.com slash masters. It’s my pleasure to welcome a returning guests back to the show. He’s an old friend. He’s been on many times and that is Chartered Financial Analyst and author of several books on economics and finance. Mr. Dan Ammerman, Dan, welcome. How are

Dan Amerman 19:43
you? Good, Jason, thanks for having me back.

Jason Hartman 19:45
Good to have you on again. Good to have you on again. So my listeners have been following your work over the years as we’ve had you on the show. I think I’ve been following your work for a good 12 years now I want to say would that be about right since I went to sounds about

Dan Amerman 19:59
right I remember I met you in Newport Beach in 2008.

Dan Amerman 20:02
Yep. That’s

Jason Hartman 20:03
well that it is about right. Yeah, exactly. What is going on now you you’ve been lately diving into studying the feds cycle. I’ll have you explain to the listeners what that is. But you know what it means to real estate investors, investors in general, the broader economy. Tell us what your latest work involves.

Dan Amerman 20:21
This is something I’ve been doing for a number of different years. And what I’ve done recently is I’ve taken a much more heavily quantitative look. And I’ve also created a framework for looking at what’s been happening in terms of the Federal Reserve interventions. They’ve been getting much more heavy handed than they used to be. We are now seeing some flashing warning signs of a possible recession next year, too. We don’t know for sure yet, but it looks like the chances have really been rising. And that means that we could be seeing some truly major federal reserve interventions. Again, it looks like the Federal Reserve Serve has effectively paused when it comes to its increasing interest rate cycle. And it looks like the Federal Reserve is also effectively about to pause, it’s winding down of the balance sheet, which means the starting point for any future expansions, instead of being under a trillion dollars may be $4 trillion. And then building on top of that, as something else that I’ve been studying that I think would be of particular interest to your readers, and I put together a series to kind of make it visually obvious so people can really understand that I’m calling the five graphs series, which is taking a look at real estate prices, how they used to behave, and how they are now working in and just entirely different way than they used to, and how to understand what’s happening with the economic cycle with the traditional fed cycle. And then we have this amplified fed cycle where they’re just basically doing more and more major internet All the time. And that is very directly spilling over into changes in real estate prices on a national basis.

Jason Hartman 22:07
Well, that, you know, you had me at real estate prices, Dan, and I think you had everybody else. So you’re saying that the traditional influences of those cycles of real estate prices up and down, are different now? Are we in a new era?

Dan Amerman 22:22
Yes, we are. And we have been so since about the year 2000. Okay, and the change was just radical. And again, I have this, this is a series of graphs. So there’s a visual component, it’s a lot easier to just look the visual side instead of talking about it, but I’ll try to talk you through it right. If you go back in terms of real estate data in history, it’s much more problematic than things like stocks and bonds and so forth. Because the issue is, of course, the country has been changing the entire time and that’s reflected in real estate prices. The average size of the home has been increasing over the decades, the average amenities have been increasing. And we’ve also had an increasing concentration of the population into higher dollar urban areas instead of the more lower dollar, small town, rural areas and so forth. So just literally tracking housing prices doesn’t really do anything for you. And one thing that people do, of course, is the track the Case Shiller index, I very much prefer to use the Freddie Mac housing price index. But what each of those have in common is that they use a pairs based methodology. So they’re taking basically the same homes, and they’re tracking the sales prices on them at different points in time instead of just average homes. So you have a really good idea that if you’re comparing prices from 20 years apart, and of course, there’s all kinds of averaging and so forth that goes on. It might be this 2200 square foot house on this block in this neighborhood, right, right.

Dan Amerman 23:57
Okay, so then a price change.

Jason Hartman 23:58
Yeah, let me say something And a couple of things about that. So number one, I like this methodology, because, you know, it kind of reminds me in the world of the stock market when they were looking at retailers, and they talk about same store sales, right? Because it’s that sort of like, if a company is expanding, and it has more stores, or it’s contracting, and it has fewer stores, and more, you know, businesses condensed into those fewer stores, or the expansions just because it’s, you know, got all this new market share, that doesn’t really tell you as much as same store sales, right?

Dan Amerman 24:31
Yes. And it’s same house sale. Yeah, it’s very much the same thing. It’s a much more accurate way of tracking things, right.

Jason Hartman 24:37
The only thing we have to look at on that is that I don’t know most or many or what the right word is. But you know, a lot of times these houses are improved. Sometimes they’re improved pretty dramatically if it’s one of these sort of investor areas where there’s a lot of rehabbing going on, or one of these yuppie areas where there’s a lot of keeping up with the Joneses going on right either one of those will be Hot what I’ll call high, you know high improvement, like that’s added value. That’s not appreciation. That’s just the improvement, right? And there’s a different right, as well. So it doesn’t account for that. But it’s still better than the other way

Dan Amerman 25:12
it is. The issue we have though is you can’t really go back to say, 1910 1920 1940. It wasn’t really being gathered then. So effectively, we’re going back to the early to mid 1970s. The initial period that I tracked was 1975 to 2000. And it was fascinating, because homes were an almost perfect inflation hedge during that time period. In fact, they were a much better inflation hedge in terms of correlation with changes in dollar value than gold. It’s, you know, a lot of people say that couldn’t be true. It’s absolutely true. Housing would move up and down in a range and I looked at it on an inflation adjusted basis, very consistently, within 10% of the long term average. It would Basically never go below that or never go above that. So if you use a principle Some people use called regression to the mean, which says whenever you get away too far away from average that investments can move back the other direction. That worked perfectly for housing for many years. Right. But then we had the crisis of 2001, which followed the popping of the tech stock bubble. We had a recession at that time. And that’s when the Federal Reserve really kind of got the crazies going in terms of the interventions and with the amplifications. We’ve seen since then, in order to contain the damage from that recession and to try to reboot the economy. They moved interest rates down to a 50 year low, which was below 1%. Right.

Jason Hartman 26:45
And in real terms, I think we’d probably both agree those were definitely negative interest rates, right?

Dan Amerman 26:50
Yes, absolutely. The other thing that happened is they moved mortgage rates down to 50 year lows. If you track it graphically, it’s just like a perfect correlation, you can see exactly where the real estate market single family housing in the United States just completely burst out of its previous pounds. And it went up by almost six times what it previously would have been in terms of a maximum. So instead of going up by 10%, inflation adjusted terms a national basis, and that’s the nice thing about the Freddie Mac index case, Shiller is just the, you know, the 20 largest urban areas, Freddie Mac is all 50 states, just even going across all the different rural areas, including all of that, it was still about a 60% gain. And then of course, it came back down again. But the interesting part is it never returned to average. It never came down to the mean. And since then, it has, of course, rebounded since about 2011 2012. And in nominal dollars, we have the highest prices yet. And inflation adjusted dollars. And again, you gotta you have to see the graphs. It’s an almost perfect duplicate of what we’re Seeing in the early 2000s, if you look at current real estate prices, and in order to explain that I then took several other factors into account. The first one was changes in the yield curve. And you may have been talking about changes in the yield. A lot of people have been doing center in terms of a potential yield curve inversion. And typically what happens is that yield curve changes are kind of contra cyclical when it comes to the overall interest rate cycle. Generally, when interest rates are going down, yield curve spreads are increasing. So, that means that mortgage rates are not dropping as fast as let’s say short term rates. But on the other hand, when rates are going up, as we were saying until very recently, short term rates tend to rise much faster than long term rates. Because just 30 year fixed rate mortgages is the most common example there. That’s priced above the 10 year Treasury so that the yield curve spread helps explain how that goes up and down. And if you put what the Fed is doing Together with and again, this all works better graphically. With the changes in the yield curve, you get changes in mortgage rates, then you get changes in mortgage payments when you on an inflation adjusted basis when you build in the prices as well. And once you take those five steps and you put them all together, you have a perfectly predictable pattern where housing prices begin to make perfect sense, right? Yeah. And where we currently are and where we were in the early 2000s. were entirely logical when you look at mortgage payments on an inflation adjusted basis.

Jason Hartman 29:33
Okay, okay, that’s good. And so what let’s remember that and let’s go back to that in a moment. But the thing we also of course have to say which I know you understand all too well, but just to remind our listeners and we may have some new ones, three types of markets, linear, cyclical and hybrid. Most of the attention goes to those cyclical markets with a glorious highs and ugly lows, not the, you know, middle America linear markets that we like the best in All of this talk about pricing doesn’t take into account rental rates. In fact, like you mentioned earlier, Dan, a lot of that is counter cyclical, because when you know prices decline or soften at least and there’s not as much interest and urgency to go into the for sale market, we usually see upward pressure on rents. And then we see the opposite when the sale market is just going crazy. This the problem with having a Federal Reserve, you know, it reacts to quickly these, if the marketplace was governed by a free market rather than a centrally managed economy, we would see, I would argue, much more gradual changes in ups and down cycles. But when the Fed cuts interest rates, or they raise them in closer urgency by raising them, you know, and to a point obviously, then it levels off or declines. But you know, it just causes too much craziness in the marketplace. It’s like a feeding frenzy. It’s ridiculous, you know, that’s not a normal market shift the result of a centrally managed economy, right?

Dan Amerman 31:05
And it’s now directly translating into real estate prices, to an extent that is historically unprecedented, or should say the last approximately 20 years have created an entirely different price cycle. And as you point out, of course, that’s different in different regional locations. Yeah,

Jason Hartman 31:25
yeah. Okay. What does this mean today? And like, what can we expect? Well, you know, predictions, everybody. Everybody wants a prediction yet. Few are willing to make them. But now, what do you think,

Dan Amerman 31:37
Oh, I’m willing to make one. Okay. And this goes back to analyses I’ve been doing for many years, but I have a current series going, where I’m looking at how the Fed has reacted at different points, changes in the cycle over the last 20 years and what it does next, and we have unless they’ve repealed the business cycle, we’re gonna have another recession right? And I did a recent piece tracking this looking at the characteristics at different points in time. We’ve had 34 cycles of recession and expansion over the last 164 years, the National Bureau of Economic Research looks back to December of 1854. Wow. And it’s kind of a night and day cycle. And every time you get a really long day going, there’s a group of people who decide, well, you know that nighttime is not going to happen again. This time is different. It’s those famous words that always get you in trouble. This time is different, and then it’s not. But what is truly different is that we have an increasing number of warning signals of a potential recession starting in the next one to two years. And the Fed this time around had to pause their increasing interest rate cycle at the lowest levels that we have seen in many decades. There are only about between two and a quarter and two and a half percent. Yeah, here’s something that we know about the Fed We know what their policy is we know and again, I’ve got graphs of this more information, my website, modern monetary policy, which sounds really complicated. Yeah.

Jason Hartman 33:09
mmt. We’ve had some interesting discussions about that on the show.

Dan Amerman 33:14
This is the this isn’t actually I’m empty. Okay.

Jason Hartman 33:17
This is just monitor. Okay. You’re not talking about the philosophy known as

Dan Amerman 33:20
No, I’m not talking about that. That’s a bet you had some discussion.

Jason Hartman 33:23
We have Mike Norman on he hung up on me. But then he came back on and did the show and complained the next day.

Dan Amerman 33:31
What the Fed does, and they do it every single time. And it’s it’s not that complicated is every time they’re either in a recession, they may have not realized it because this doesn’t don’t have the statistics in real time, or they think they’re about to go into recession. They take a sledgehammer to interest rates, and they knock down

Jason Hartman 33:50
it’s too sudden, it’s too abrupt. Yeah,

Dan Amerman 33:52
exactly. And we know exactly what they’re going to do and they’re talking about it in the minutes. If you look at some of the FOMC meetings, the First thing they’re going to do the next time they think we’re in a recession or we’re in danger of going into one is they’re going to immediately reduce interest rates to zero. They’re going right back to Yeah. And you look at their staff discussion, this is publicly available again, minutes of the FOMC. What they are expecting is that rates at what they call the lb effective lower boundary, which is zero percent that’s just fed speak, to be more frequent and more protracted in the future than they’ve been in the past. So as far as the Federal Reserve is concerned, you know, I think a lot of people think that our zero percent interest rates were just kind of this one time anomaly that couldn’t be predicted that will never happen again. Now the feds expecting will go right back there will go back there frequently and we’ll go back for longer periods of time than we’ve been in the past. And that completely changes things when it comes to real estate.

Jason Hartman 34:54
Yeah, this will be continued on the next episode. Thank you for listening and happy investing. Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website Hartman. Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.