On this Flash Back Friday originally published in February 2014 as Episode 363 Jason is joined by Scott Shellady, Senior Vice President of Derivatives at the Trean Group. They talk about why people should be investing in tangible assets such as real estate. He uses an acronym SWAGER for Silver, Wine, Art, Gold, Energy, and Real Estate and goes into why they are the best investments. They shift the conversation into preparing for retirement and discuss common mistakes made by baby boomers.
Jason Hartman 0:00
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is hand picked to help you today in the present, and propel you into the future. Enjoy.
Welcome to creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing 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 multi millionaire who not only talks the talk but walks the walk. He’s been a successful investor for 20 years and currently owns properties and 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:07
Welcome to the creating wealth show. This is your host Jason Hartman. This is episode number 363. And I want to apologize in advance if the audio quality isn’t as good as usual today, because I am recording just simply directly to the computer, but I’ve got a special guest back for the third time and that is my mom. We’re here at her McMansion. This ridiculous, McMansion Tara in Alabama, and I was at a conference in New Orleans as you know it on the last episode. And so I’ve been here for a couple of days. And I know you regular listeners and attendees of my seminars have been interested in hearing the story about how she builds this house. But we’re going to talk about one of our tenants today and some of her different property management experiences. And we’re going to play for you A almost hilarious phone message that she got from one of her tenants. And what I really want to focus on with you today. Before we get to our guest, who, by the way is Scott shell today talking about derivatives, not sure if I mentioned that or not. But anyway, that’ll be our guest here in a few minutes. But what we want to talk about today is fostering an ownership mentality with your tenants. And what I mean by that is this, sometimes you have to train your tenants, sometimes you have to train your property managers. And that, of course, depends if you’re self managing your properties or if you’re using property managers, but you have to ultimately train either the manager or the tenant to understand that when people rent a single family home, or a unit in a duplex or four Plex, or even in a large apartment complex that you might own, we want to foster a mentality of ownership like they’re the owner and they should be doing a lot of things to the property. And you shouldn’t have to deal with every little thing. I remember one of my property managers in a Pensacola, Florida property that I own email And they said there are ants, will you authorize paying for an exterminator to come over for, you know, to exterminate the ants? And I’m thinking, no, this is ridiculous. I mean, that’s a ridiculous request. Now, just so you know, I gave up ownership of my own home about two and a half years ago and I rented a really swanky high end penthouse in the Phoenix Arizona area when I moved. And you know, I kind of like being a renter and a lot of ways, especially, you know, from a large institutional landlord, where they, you know, if, if a light bulb burns out, they come and change the light bulb for me. I mean, it’s, it’s a bit crazy, mom. Thank you. Yeah. So so but that’s not the kind of experience I’m going to provide for a tenant who’s renting a single family home for me, I want them to act like a homeowner, I want them to take care of things and fix things and, and not call me for every little thing. And when I’ve talked in the past about the idea of self management at a long distance, which I have seen successfully done. And my mother we are about to hear from has definitely successfully done for many years. I understand that self management is not for everybody. It’s only for some people, the rest of the people will want to have a property manager. But in either case, it’s important to train the manager or train the tenant, so that you are not bogged down with little tiny issues. Okay, and this is easy to do. It’s not difficult to do at all. So here’s my mom, Joyce, and how you doing fine, Jason? Good. Well, I’ve enjoyed staying here at your McMansion for the last couple of days. And I’ve told our listeners and I’ve learned my lesson from you that I never want to build a house. It’s this ridiculous project. And since many of the regular listeners, you know, they’ve kind of asked about your house all the time here. How long have you been building this place three years, four years.
The original builder started in the end of 2000. thousand eight. And then we had a Parting of the Ways in tooth at the very end of 2009. And I came down here and I had to find everybody to do everything. Because couple of days ago, I was going through old pictures, and I happened to find a picture of this house is it was turned over to me after he left the job. All it had was drywall. Yeah. So you obviously know it did have plumbing inside of those walls, which leaked like crazy one time and destroyed a whole bunch of stuff. Anyway, that’s why it has taken me so long because obviously I’m not a builder.
Jason Hartman 5:37
Well, and you’re you’re a perfectionist, and you want it a certain way, obviously because this has always been your dream to build your Southern mansion. But I tell you, when I own that traditional real estate company and we served a lot of clients, you know, wealthier clients in Irvine, Newport Beach, California, Southern California. We see actually it wasn’t funny, it was tragic, but we would see these couples, you know who will wealthy people they Bye, you know, a very expensive lot in, say Newport coast California, and with the intent of building their dream mansion, you know, and the whole project altogether would probably cost them 810 million dollars. And invariably, that that is something that will massively increase the divorce rate. Because building a home is not for the faint of heart. What would you say about that?
I would agree with you 100%.
Would you do it again?
No, Good. I’m glad you said I would take any house and rip off the front, do whatever it took, but I would not go from scratch again.
Jason Hartman 6:34
So it’s easier to fix something up and rehab it and build it from scratch. I think so. Yeah. But what I really think because I’ve talked about on the shows before and I’m trying to convince you of is that, you know, if it’s an expensive home, it’s just such a better deal to rent it because the rent elasticity is just not there. A $2 million home can be rented for 4500 to maybe five $6,000 per month. So that’s about a quarter of a percent rent value ratio. When you’re the tenant, it’s favorable to you to rent the high end home. But if you invested $2 million through my network in in the different areas that I’d recommend people invest, ideally, they’d get 1%, if not even a little bit better than that. So they get $20,000 per month. So sometimes it’s better to rent that own. And that’s that’s been my philosophy since I found that swanky penthouse bargain in Phoenix, you know, because, you know, I sold my home in Southern California was in Orange County, and I sold that house for just under a million dollars. Of course, it was a pretty downtime in the market. And I thought of putting it up for rent and the most I could have gotten for rent for that house, it was almost a million would have been about 4000 per month, maybe 4200. If I was lucky, and I thought, Gosh, if I just want to deploy a million dollars through our network and buy 10 $100,000 houses that rent for $1,000 a month each. It’s better to rent my high end homes. Myself and rent a lot of lower middle houses to other people, right?
Yes, just because the expenses and fixing up the lower end houses don’t cost as much. When you have repairs to a high end house. Those repairs are expensive.
Jason Hartman 8:15
Yeah, yeah, I mean all the fixtures and the fittings it’s this the first time I actually stayed here I saw your house before is it’s been in the various stages and it’s very long construction project. But you’ve got 14 foot ceilings moldings that are about a foot thick,
like all dentals Yeah.
Jason Hartman 8:32
dentals Dental moldings and it’s just incredible. You know the amount of money you spend on this. I think you’ve over improved What do you agree with that too?
Well, not in my mind.
Jason Hartman 8:44
But I think you have you got you know, 9600 square feet here and we’re sitting it on the back patio now but looking at the unfinished backyard now what are you going to finish the backyard boom.
Well, I had to do the inside stuff first now. Tomorrow. My chandelier is arriving. God will be gone. Yeah.
Jason Hartman 9:02
So, anyway, interesting. Okay, well, hey, anything else you want to mention about why people shouldn’t build a house or this experience, but then let’s talk about, you know, the tenants investing.
I just think it’s better to have some very good builder do all of this stuff for you, rather than you get involved.
Jason Hartman 9:19
And it’s better to buy it on the resale market and then fix it a little bit the way you want it. But, but even better than that, is to just read it.
Yeah, I would agree.
Jason Hartman 9:29
you’d agree. Okay, good. Well, so you’ve had some long term tenants in your properties, the longest one you’ve had has been there a quarter of a century? Yes, you did hear that, right. 25 years, since 1989. You’ve had this one tenant. We’re about to play a phone message from this tenant, which I think you’ll really get a kick out of listeners, because because you have really fostered a culture of like an ownership mentality with the tenant, where he’s doing all kinds of stuff to improve the value of you property. It’s really amazing. Maybe we should start out by just playing the phone message. Okay. Yeah, I was amazed with what he had done and then and then tell the background but you know, he’s, he’s been there this 110 at 25 years. You’ve had other tenants for 789 years. I know, you know, maybe you can give a little more detail on that. But But here’s the phone message. Okay, just listen to this. I think you’ll you’ll get a kick out of this
or do I start?
Jason Hartman 10:24
Okay. So just so you understand this is the tenant calling my mom to give a report on what he’s done to improve her property. Okay, so that’s just giving you a little context. Here we go.
Across 1400 bucks,
Jason Hartman 10:40
he put a front yard in for 1400 dollars
and I just cut it right now. also put a brick wall and on the west side of house because the neighbors have So
Jason Hartman 11:14
so your tenant put in a $3,000 fence at his expense
nearly fell over when I heard this phone conversation
Jason Hartman 11:26
and he’s giving you a full report. I just love it. Okay let’s go on
in the kitchen the one that you
because it wouldn’t stop leaking
the mailbox I haven’t got I got it but I haven’t put it in yet.
And there’s one or two other Say hello. And last but not least, there was an earthquake
two weeks ago and looks like it
damaged one Water Heater. Because now I noticed when I was back there cleaning that there was water leaking out of that room. So I open the door and it looks like the Water is leaking out from the water heaters dripping snap pouring out it’s just drip. We haven’t noticed it because
so I haven’t been back here but I went back here today and I noticed so that’s what’s going on. I don’t know what you want to do about it or how you want to deal with this or whatever, but probably gonna need water here.
So I can put it in if you get one. I put the last one in. So too much
so it doesn’t have to be today I’m pretty sure we haven’t noticed blosser water anything so probably can be weekend or something I’m too drunk has got a dead battery in it to get it started today and a one star so I had to go get a new battery for Today
so I’m on my own. So anyway, that’s what’s going on.
Have a nice day.
Jason Hartman 13:13
I love the two Lou at the end. It’s funny. He’s a funny guy. So he replaced the last water heater for you. Well, and now he’s replacing the new one for you.
Yes. I mean, I was going to have you know, someone do it. And he got anxious and he says, oh, I’ll go pick it up and do it myself.
Jason Hartman 13:31
Isn’t this great? So how do you get it? I mean, I’ve had some tenants like I remember I think one of my best people was my guy in Houston in one of my Houston properties and, and he was I talked about this on a prior episode. He was an engineer, and he helped design oil drilling platforms for the oil companies. Now Houston is Houston’s a great place to invest. I love Houston because it’s got that transy and highly paid tenant base, you know, where they move there for a couple years. Then, you know, like this guy, that guy I’m just talking about. I think his name was Paul. Yeah, Paul was his name, I’m pretty sure. And you know, he was married. And it was he just he and his wife in the property. But he got shipped off to some foreign country. I think he’s in the Middle East now, you know, he works, you know, helps them design, maintain these oil drilling platforms. But he was so handy. He did everything for me. It’s like, he moved in with a couple things that were unfinished and I didn’t have a property manager. I was self managing that property and listen, I knew I live nowhere near Houston. Okay. At the time I lived in Southern California, or maybe I just moved Arizona, about two and a half years ago. Anyway, he got me quotes and like fixed a bunch of stuff. There was only one thing he couldn’t fix. It was an electrical thing. He couldn’t figure out he tried to figure it out. And he just couldn’t figure it out. So but he was fixing all kinds of stuff for me. I mean, I thought this is great. And don’t look at folks. This is what people should expect. A lot of life comes down to setting proper expectations. Right. And in a single family home type of rental scenario, they it’s not like you’re going to come out and change the light bulbs for them to use that metaphor or spray for ants. I mean, if someone calls me and says there’s some ants, I say, you go to the supermarket and you buy some fogger and some raid or black flag spray, and I mean, this is not like this. It’s not like being in a hotel or an apartment building. Okay, what do you say about that?
Well, I that’s absolutely correct. And there’s nothing that would bother me worse than having some tenant called me up and tell me that the light doesn’t work. And what it really needs is a light bulb, a new light. I mean, that is just ridiculous. So you know, you kind of have to set that pace with a tenant, the day you sign the lease, and I always inquire as to whether or not they are kind of handy. That really helps me know what what what’s going to happen in the future. But with this tenant that has done so many things now, none of these things that he called me up and talk to me on the phone that he had done the $3,000 for the fence and 1400 dollars for the, for the front yard.
Jason Hartman 16:13
It was it was 50 bucks.
Yeah. I mean, we had not discussed any of these expenses beforehand. So by rights, I would not have to pay any of these expenses because
Jason Hartman 16:23
they were Yeah, right.
I mean, he went ahead and did them entirely on his own and don’t believe me, I am highly appreciative of what he has done right.
Jason Hartman 16:33
But the water heater I will gladly take care of Sure. There’s just no problem. Yeah, but right but but all you’re going to end up doing and when we were at the movies yesterday, he called just before the movie started. I remember we saw what did we see a Winter’s Tale
I want us to
Jason Hartman 16:48
Yeah, this movie was pretty good. And anyway, he called and he said that he was doing the word Are you just gonna pay for the parts? Is he gonna do all the labor?
Well, he’ll he will pick up the water heater, the water haters, I won’t have to pay the store to deliver it. And if he needs any parts course I’ll pay for them.
Jason Hartman 17:07
Yeah, yeah. So but he’s doing the labor. You got free labor? Yes. Wow. That’s fantastic. And by the way, this tenant we should mention is a truck driver. Yeah. Okay. That’s one thing that’s setting expectations when you have the tenant kind of set the pace, as you say, but what if you have a property manager? Let’s talk about training them a little bit. Now, I have some tips on that. I think what’s really important with a property manager, and with most things in life is the way you begin the relationship. That’s the that sets the tone, usually, and you can fix it later if you didn’t begin the relationship, right. But it’s a little bit harder to do that. Because you’re, you know, it’s kind of an uphill, you’re swimming upstream if you look. So with a property manager. What I do is I’m always careful whenever I have a new property manager and keep in mind just so you know, some of my properties, I’m self managing from a distance and some of them you know, some of them are 1500 2000 miles away from me. I’m self managing. But sometimes I have a property manager and my rule on that again, and I’ve talked about this at length and other episodes. So look back in the archives and, and listen to some of my talks about self management if you’re interested in that. But if there’s a property manager, I make it a point to really look carefully at their statements in the very beginning of the relationship, especially that first three months, I want to look and I want to nitpick, I don’t want to be picky and I want to email them and call them out on every little thing. Even if I don’t actually object to it. I’m going to make up a fake objection. So they all know I’m paying attention. They’ll know I’m not a client who’s a pushover and that’s what I want them to know. Any thoughts mom?
Absolutely. Because that was one of my tenants. The just before I started managing everything myself.
Jason Hartman 18:50
Yeah, and by the way, we should say you’re 100% self managed, and you have properties and Oh, I got to tell another funny story. I took a picture of this. You pick me up in New Orleans, which is about three hours away from from here. You know what I’m gonna say? Right? And where were we driving by we drive to Mississippi. Yeah, to come here and you have a property in Gulfport Mississippi. Yeah. And what did we have to do? Mom? We were
we had to just take we had to stop at this exit because people keep calling me about this sign and I’m sick of answering the phone or not answering the phone, which is the rude thing to do, you know, because you never know. Maybe you want to rent to that tenant eventually. Anyway, I had to stop and go take the sign off the telephone pole at Walmart.
Jason Hartman 19:40
It was it was Home Depot. Yes. So basically, we had to get off the freeway in Gulfport on the way here because she had one of her for rent signs was still on a telephone pole there. And I love how unprofessional you are. What I mean by that is you take a big, thick magic marker Sharpie you know, a big thick one. And you you take plain corrugated plastic signs, and you just wait 18 by 2418 by 24 inch science and you write in your own hand how home for rent and I think is what you said you didn’t say house you say home home for rent. Yeah, yeah. And then you you write the address.
Yes. And you write telephone number
Jason Hartman 20:20
your Anything else? I can’t remember nothing. Yeah. So So I got out of the car and I tore the sign off the telephone pole had two nails in it, and you just got yourself
but it’s so inexpensive to do that and it is so convenient. You don’t have to take stuff to a printer. You know they make mistakes in your phone numbers. I mean, they charge you a whole bunch of money to do that. All you do is find a local printer who will sell you these little corrugated 18 by 24 plastic things for 99 cents.
Jason Hartman 20:53
So you buy these white signs for 99 cents each. Then you write on them with a magic marker, my folks, I just got to tell you I’m not like this. My mom is the ultimate do it yourselfer? She really is. And I don’t necessarily recommend that
I’m a hands
Jason Hartman 21:07
on person. Yeah, you really are. So we had to take down the sign because people kept calling about the house for rent and it was already rented, right? Yeah. So what else but
the point is, when people start calling on your house for on your home for rent signs, always ask, Where did you see that sign? Because then you will know the most profitable places to put the signs up in the future.
Jason Hartman 21:29
Right. Good point. Good point. Okay, and what else should we say about setting the tone or setting the expectations with either your tenants or your managers?
Well, this manager went out and replaced the outside light bulbs in Georgia. You know, and so anyway, I said, I am refusing to pay for that. So they took it off the next month. I mean, you just you just have to let them know that some of these things are absolutely ridiculous. Now the tenant is respected. Well for replacing the light bulbs, whenever they burn out whether they’re inside or they’re outside, this is not these are not
Jason Hartman 22:07
300 unit apart luxury apartment complexes where, you know, it’s treated like a hotel would be treated, right? If I was staying in a hotel, I would certainly expect them to replace the light bulbs in my apartment building, the built in lights, they if one brings out I just emailed the landlord and they come and replace, which is, you know, I would never expect that if I was running a single family home. It’s just not what we do.
Well, the other thing is, you need to instill a sense of pride in that tenant. For example, if the dishwasher goes out, if that person is handy, I say I am happy to buy you the new dishwasher to make it convenient for you and your wife. So you’re not dealing with an old incompetent dishwasher, but you put it in and I’ll be happy to buy one for you. Yeah,
Jason Hartman 22:58
so you sort of make a deal and That’s another thing I do, by the way is not exactly like that. But another thing that I’ve done is I’ve, you know, when there are sort of things that are like these borderline requests, like the tenant would like to do, I mean, I don’t get as good a deal. Nobody gets the deal to get. But I remember one time they wanted to build a fence or make a higher fence or something like that. And you know, the landlord, the manager, I had a property manager on that one, and they said, you know, will you pay for it? I said, No, I’m not going to pay for that. It’s not like it’s not, why should I but I did offer to pay for a portion of it. I think I paid like 30% and the tenant paid the rest. So the tenant is paying to improve my property. And of course, I always want to see pictures of before and after. And you know, I want to see the actual receipts from for any parts or Oh, they
must send the receipt.
Jason Hartman 23:46
Yeah, of course. And so that’s what what you need to do. Okay. So instill a sense of pride, a culture of ownership mentality. Anything else?
Yeah. You say look at this is your home. Nobody is going to Come and disturb you in your home. I don’t bother you, I don’t come around and plant no flowers and keep looking at what you are doing. This is your home, and you feel a sense of pride living in it. And obviously, you should be taking care of it.
Jason Hartman 24:18
Yeah, good. Good point. Any other tips you can give on any property management things, just anything in general or anything more on this topic.
Just act in a very businesslike professional way, always with your tenants and be concerned about them. But don’t be overly friendly. It’s it’s a business proposition. You expect your rent on the very first day of the month. There’s absolutely no leeway. Three days, five days, anything like that? Because it’s just like you’re receiving a paycheck. It’s just like when they receive their paycheck if their boss tells them, gee, I can’t pay it till three days later. That doesn’t work. them, so therefore it shouldn’t work with you. I’m receiving your rent Know what? Also with that in mind, what do you do as far as I mean you’re you’re managing all your properties yourself nowadays and they’re scattered all over the country. Okay, these are not near you. You don’t own any in your city, right?
Jason Hartman 25:20
Yeah. Oh no. Why does this
I have a p o box that everyone mails to?
Jason Hartman 25:25
Oh, no, that’s what I was gonna ask. But you have most of your tenants do deposit right into your bank account? Yes. Yeah, that’s, that’s the convenient thing. There’s no longer anything. Well, I put it in the mail within within seconds second to know if that deposit is there. Okay. So they just walk into a bank with a national bank, and they just walk into a branch and they deposit it and you just look and see that that money is in in there. Right. And you always prorate for the first of the month. Okay. So yes, yes,
it was when they first moved in.
Jason Hartman 25:56
Right, right. But they don’t always move in on the first of the month. That is correct. Right. So You make the proration. Now talk a little bit about that, because that’s interesting. When you rent to a tenant, you always get certified funds, right? So there are cash or cash until you take cash actually, Oh, wonderful, gosh. Something else. I can see you walking around with $3,000 from the tenant
while you immediately get to the bank,
Jason Hartman 26:22
the positive okay. So when you do the proration say for example, they move in on the 13th of the month, right? We’ll pick a lucky number lucky 13. Right. And they move in on the 13th. How do you do that proration you get the security deposit plus you get a full first month rent and then prorate the second month. So
the rent goes from the 13th of the month they move in till the 13th of the next month, right. But then on the next month on the very first day of that month, they pay you that smaller amount of rent, right
Jason Hartman 26:57
so so up
as always based on three days don’t try to.
Jason Hartman 27:01
Yeah, preparations are always 30 days, whether the month is 28 or 31. It’s 30 days is how preparations always work. But what I want to say is that so you get a full first month up front, even if they moved in on the 28th of the month, and there were 31 days you get a full month. Yeah, good. Absolutely not three days where some people have Oh,
Jason Hartman 27:22
Okay. And then you get a full security deposit. Now, how do you calculate your security deposit? Usually?
Well, if the person would really have bad credit, and I would be leery of them somewhat, I would charge them more than one month security. And that came in good stead recently when I had to do an eviction in Long Beach. Anyway, always get at least a month a minimum of one month.
Jason Hartman 27:50
Yeah. So you get one month security plus a full first month rent you prorate the second month. Now, you know I used to get sometimes although don’t do it all the time, but even more than one month. Rent
all the way like you can. Yeah,
Jason Hartman 28:02
bye for the security deposit. Oh, absolutely. And I never collect last month’s rent because the, you know, the thing that landlords need to understand. And of course tenants need to understand is that the security deposit cannot be used as the last month’s rent. That’s your security deposit. So the tenant doesn’t get to, once they give their notice, say, Hey, I already gave you that security deposit for 1500 dollars. that’ll cover me. No, it won’t. If you don’t pay the rent this month. I’m going to file an eviction. Now
look at look at this a whole illegal situation now. It’s its first month rent plus security deposit. There’s no such thing as
that’s went by the wayside years and years ago. Yeah.
Jason Hartman 28:43
So never do that. Talk to us about credit. You said you would rent to people with bad credit. I’m talking about pets, because your tenant when we played that funny phone message, you did mention his dogs. So let’s talk about pet rent. Let’s talk about credit reports. Because a lot of otherwise, probably Good tenants have very bad credit nowadays, because of the financial crisis. And you know, as landlords, we have to look at that from a positive perspective, that is going to keep them in the rental pool for years to come. So right
to shame, absolutely. Don’t not rent to a tenant, because he has bad credit. And I tell the tenant, I look, we’re going to run a credit report, we are not going to turn you down on the basis of that alone. We are interested in two things, how much you earn, and that it is enough so that you can pay your rent every month, and how well did you pay your last landlord? Those are the two things that I am most concerned with. The fact that the tenant has bad credit means that he can’t go out and buy a house and move out of your rental right away. And so that bad credit is going to keep him as a very good tenant for you for quite a while.
Jason Hartman 29:57
So what do you do with with bad credit? You really look at the FICO score do you look at specific derogatory is on the credit report? Or how do you make the decision as to how much the security deposit will be? And I’ll give an example before you speak because I remember many years ago, you gave me this idea. I had a tenant and it was in a California property many years ago, which turned out to be not that great a deal, unfortunately, but But anyway, I had this tenant and he had recently declared declared bankruptcy and the maximum rent I and I, you know, remember, I was just a kid back then I didn’t know anything, but I just remember, I had to call and research and figure out you know, this may this was actually before the internet. So I had to call and research and figure out that the maximum legal amount I was allowed to collect was three months rent on a furnished place, and two months rent a security deposit on an unfinished race. And this was unfurnished and what you said to me, as you said, You know, I came to you for advice, and he said, Jason Just having pay rent in advance, and he did, he paid me now get this folks. He paid me six months rent in advance, plus the maximum legal security deposit. And after the six months was up, you know, he just started paying. So it worked out know, what else would you say?
You can do that.
Jason Hartman 31:19
You can accept advance rent in most places, probably all I’m not sure. But laws vary from city to city state to state. Okay. So
I think I actually did that. Also, I don’t remember the details, but they they had bad credit. And I don’t remember the circumstances, but I think I did, except about four months rent
Jason Hartman 31:39
four months, right? Yeah, plus the maximum allowable security deposit. So that’s one thing you can do. I mean, some of these tenants really oddly, almost have enough down payment for a house they’d like to buy one, but their credit won’t allow them to buy one so that makes them a great tenant for you. And it’s a win win situation because they need housing, and they can’t do it any other way. And you’re gonna provide it for them. Just Make sure that the deal is equitable Of course. Now let’s talk about pets. We both are animal lovers, you and I and I remember when I was a kid I had a couple of cats and dogs and we both like those a lot, but we’ve never seen them improve the value of one of our properties. So So what do you do about pets now what I try and do although some property managers frankly think this is like a crazy for an idea and I, again, I have to educate them I charge pet rent. And institutional landlords do this all the time, they’ll charge $40 a month if you want to have a dog and they will limit the weight of the dog usually to 30 or 40 pounds. They just do it by weight and they also say it can’t be younger than one year. Because then you know with a dog you got a puppy is obviously gonna go to the bathroom. Right? So what do you do about pets mom?
Well, until I had a conversation with you earlier today, I was just charging Yeah, you
Jason Hartman 33:00
were just charging a security really a one time fee for the Pat. Correct. But right. But I said charge it every month.
Jason Hartman 33:08
I’m going to do that. Okay, well, I taught you something good. Any other things you want to close with before we get to today’s guest, which is Scott shall today to talk about derivatives.
I just think that it’s easy to manage your own properties. The longer you do it, the easier it gets. And why pay all that money to a manager. But I know some people aren’t as hands on as I am. Yeah,
Jason Hartman 33:29
yeah. And in the interest of full disclosure, we should also say you are retired. You don’t have a day job anymore. This is your day job, right? Yeah, is managing your properties. So managing your properties and building this house, which is a ridiculous project. So if you’re working full time, which most of our clients are, use a property manager now I’ve self managed from afar and done it successfully without in some ways and I just want to say this one more thing before we go I have mentioned on past episodes, but in some ways, oddly It took me doing this to realize what was what was going on what the dynamic was. But in some ways, I think that when there’s not some amorphous company managing the property, the tenant sort of wants to maintain a good relationship with the owner. And they don’t ask for a lot of stuff when it’s when they got to come to you directly. You know what I mean? They don’t bug you, they want to maintain a good relationship. When it’s a management company. It’s sort of like the government. It’s like when you know what I always say about government when it’s everybody’s money, it’s nobody’s money, nobody cares, right? So they don’t care. They’ll just like ask for everything and they’ll bug the manager incessantly. You got to do this. You got to do that spray for ants. I’m not going to lift a finger type of mentality change the light bulbs, but when it’s a person and they’ve got to call a person or email a person, they kind of don’t ask for as much a lot of times right. Would you agree with it? I think so.
Yeah, I think so too. When it is someone in personal out there like the property manager, like Who is he? Who’s this company? It’s a big, right. But when you have to personal one on one with somebody, then you are a little bit Shire, I think. Yeah,
Jason Hartman 35:09
I agree with you. I think that’s true. So, so some good tips on management, whether you use a property manager or self manage, we have a lot of content on past episodes for that. And in the members section at Jason Hartman calm, we have even more because we do those monthly conference calls where we’ve talked about property management and self property management as well. So without further ado, let’s do get to our guests. And we’ll talk about derivatives which I affectionately and kind of call in a silly way I call them the thing about the thing. That’s a derivative. How do you like that for high tech, sophisticated MBA from Harvard explanation, right? The thing about the thing, that’s what a derivative is, and that’s what we’re going to talk about with Scott shell today, and we’ll be back with that in just a second. I’m here with Missy, our newest provider and she has a great free offer for you, Missy, what does it take and it’s a copy of my manual landlording without losing your mind. Fantastic. What does landlording without losing your mind, teach our listeners, it’s a great tool for teaching them how to pick out great rental properties and how to make sure they cash flow. And it’s free. And it’s available at Jason hartman.com. Slash cash flow again, Jason hartman.com slash cash flow.
Jason Hartman 36:36
It’s my pleasure to welcome Scott shell today to the show. He is Senior Vice President of derivatives for the treon group. And treon is Irish for strength. He’s coming to us today from the Greater Chicago area. And Scott, welcome. How are you?
Scott Shellady 36:49
I’m good. Thanks for having me.
Jason Hartman 36:50
Well, good, good. It’s pleasure to have you on the show. Just in our little discussion before we started recording for the show. I can tell this is going to be an interesting interview. And maybe I’d like To start off first by asking you, people talk so much about the at least the doom and gloom or talk so much about the derivatives bubble, and how there are hundreds of trillions of dollars in derivatives out there. And I have never reconciled My mind is to why that is a doom and gloom scenario because there’s a Counterparty to every transaction. And you had a great way of explaining that. So, first of all, maybe Scott, do you know, the estimated size of the derivatives market?
Scott Shellady 37:33
Now, it’s, I think it’s hard to you announcement because there’s a lot of OTC transactions that aren’t registered or at least listed exchange. So hundreds of trillions is right I but the total size is going to be very difficult to to get your head round.
Jason Hartman 37:48
I was just gonna ask you also, and I probably should have asked this first. Maybe you can just explain what is a derivative. I mean, I kind of simply say it’s the thing about a thing. It’s the thing about the thing, not the itself, just sort of jokingly but explain to listeners like
Scott Shellady 38:04
what is a derivative, while you’re writing is the thing about a thing, the best way, the best way to the best way to explain it would be if you have got, say, corn, there’s derivatives on corn, you can trade puts and calls and those things are kind of complicated. And they get more complicated than that. But you can get, you know, buy the right to buy the right to buy or buy the right to sell. So there, although they can be very difficult, but a lot of times it’s just like trading insurance. So I can buy something that protects me to the upside, or I can buy something that protects me the downside on every product out there, whether it be fixed income, commodities, or even equities has something like that. And maybe some of them, we actually have a derivative of a derivative, but we won’t go into that that gets more complicated, but really, it’s just kind of like insurance, but a lot of people use it as a way to either, you know, add more return or, you know, create more return for what they actually have in their portfolio.
Jason Hartman 38:56
And so estimated size of the derivatives market derivatives market? I know it’s hard to tell because some are over the counter transactions. But any any thoughts on the size?
Scott Shellady 39:05
Well, I think you said something like 500 trillion or something like that i
Jason Hartman 39:10
i’ve heard as high as 700 trillion. Now, just to put that in perspective, of course, a billion ain’t what it used to be. Now we talking trillions of absurdities, you know, thank thanks to the army bus bailout programs. That’s how we have to talk nowadays. But just to give the listeners some perspective, I mean, the GDP the gross national product or gross domestic product to the United States of America, the largest economy in the world, by far is about, I don’t know 12 $13 trillion dollars, maybe the GDP of the entire planet every year is about $60 trillion. Our unfunded mandate or unfunded entitlements, looking forward about 20 years has been estimated between 60 and $200 trillion. So I’ve heard derivatives market is as high as 700 trillion. I mean, that’s just insane. How can we even think about this?
Scott Shellady 39:59
Well, I’m I think that the reason derivatives markets are there is order in order to create leverage. And Boyle boy, they have done that. I mean, that’s been there that’s been their namesake. And they’ve been successful in doing so. And there’s been a lot of money lost and one on both sides of that. So yeah, that’s what that therefore, better return, maximize return and somehow get some more bang for your buck for your portfolio.
Jason Hartman 40:20
All right, well, what should people be worried about when you’re worried about the broader economy? Should you be worried about how many derivatives are floating around out there? Or is it really
Scott Shellady 40:30
a red herring? Another good question. I would say, you know, as an old trader would have said to me, you know, if you bet on the sun exploding, and you win, and what do you really win? So I think that maybe you can get really worried about the size of the derivative markets, but also I think you’d probably be better served if you just go with the flow and manage your own finances with it because you could. You’re just going to be a, you know, a fly on the windscreen of the derivatives market, if you decide to kind of try to get front of it. So it’d be safe to say that it’s better off, seeing what you can do and how you can make money living with it, rather than kind of put your head in the sand and trying to fight it. So it’s, it’s something that we Yeah, it’s big and it can be very ominous. But at the same time, it can also allow a lot of investors a great way to add more money to their portfolio. So,
Jason Hartman 41:20
okay, so it shouldn’t be something that people spend a lot of time or even worrying about, is
Scott Shellady 41:25
that correct? Yes, I think you’d probably have more of a better spent worrying about getting in the car and airplane every day than you would about the size of the derivatives market.
Jason Hartman 41:32
We talked about derivatives, a lot of people view those as like these thin air sort of smoke and mirror asset classes. Where should people start when investing in tangible assets?
Scott Shellady 41:42
Well, tangible assets? I mean, there’s kind of two different questions. There are many tangible assets or you know, a lot of times people will be able to say that there’s things that hurt when I drop them on my foot. That’s a good way to look at it. And those are the things that are would be deemed inflation proof or inflation that just against the dollar losing value over years against the dollar, or against the Fed printing more and more money. So it’s something I’ve talked about with other people. But I’ve got a little acronym called swagger. And it’s silver wine, art, gold energy, and real estate. And all of those things would be inflation hedges. And you’ve started to see some of them bubble up, you know, recently and some of the press, and I just actually looked up what the markets doing, and that’s on fire as well. So, here we sit, worrying about how many dollars are being flooded in the market, and it’s 85 billion a month. According to the Fed, that’ll be a trillion dollars a year we’re adding to that balance sheet to try to stimulate growth in the economy, with no growth really around the corner. But when we do start to see that growth, that’s when this inflation will start to take off. And that’s why these some of these investors have started paying record prices, ie $142 million for a Francis Bacon painting a week or so ago. And that’s going to continue because that can be a good store of wealth. At the same time. You can actually have That the the object you bought go up in value. Now, you mentioned something earlier before we went on. But you know, they’re also very illiquid. So it’s something that you have to be very careful about. But going forward, we’re trying to inflate our way out of this problem. And in doing so, hard assets are going to gain in value, as well as stocks. The two things that have been gaining in value because of this Fed’s inflationary pumping of money have been the real estate market, and equities. So I’m keeping that in mind, there’s a few things other than real estate like silver and gold, which gold and silver both come off as of late, but those inflation hawks are still there to buy, it will continue to rally over time, when that dollar starts to lose its value, because we’re printing so many of them.
Jason Hartman 43:42
Yeah, no question about it. And so real things I mean, what I always say is that things matter they have intrinsic value, you know, money or we should say currency to be more accurate, is just a symbol of value and it’s backed by nothing anymore. So be careful of it. Oh, you know, all control things that have universal need intrinsic value. Those kinds of things are good. Now you have this interesting acronym swagger. Can you tell us about that?
Scott Shellady 44:11
Yeah, it’s that silver, wine, arts, gold, energy and real estate. And those are the things that you just mentioned, those things have value those things, maybe a store of value for folks that have extra money and are a little bit say weary of the stock market here. But it’s also a way that really any one of those things if you dropped it on your foot may hurt depending on how big your silver gold bars are. But that could be a way of saying hedging yourself against a devaluation of the dollar. And why would the dollar devalue? Well, the dollar devalue is when we continue to print so many of them and then internationally, they don’t look as attractive just because of simple supply and demand in our own currency. So with our currency being flooded with new currency or new dollars, these types of things are a good store of wealth or a good store of the dollar value because Quite simply, if I paid $10 for that bottle of wine, and the dollar wasn’t worth $10 anymore, the dollar was worth 50 cents internationally, then it would cost me $20 to buy that one. Well, 10 I sell it at 20 I make money that way. So it’s a store of wealth. That’s that’s pretty much why you’ll see folks diving into that art market. You see gold bugs diving into gold, you’ll see real estate people, both farmers and real estate speculators hoovering up land, because they think that the dollar is stronger today. So they were able to buy more with it today than they can next year or in five years time. So those are the types of things that a lot of people that have the extra money or want to maybe say they’re worried about their dollar being worth less than the bank today, or in five years time then today, they’ll buy something where they can store that value. Yeah, yeah, very good point.
Jason Hartman 45:54
Well, a lot of people are arguing about whether we will have inflation deflation. I mean, the vast majority of people say inflation and I happen to be in that camp. But do you need a recovery to have inflation? I say you don’t. Because if you look at inflationary economies, throughout history, I mean, I don’t think anyone would argue that Zimbabwe or Argentina, or hungry or the Y Mar Republic were really recovering economies. But they still had massive inflation. Right.
Scott Shellady 46:29
And ultimately, you can argue that it led to their decline. Oh, of course. Yeah. And you’re right. So you don’t recovery is not needed part of that recipe. But what is needed is just a rampant printing or money where this loaf of bread and we all heard that German, you know, the German, the loaf of bread is $1 today, and it cost me $100 next month, that’s rampant rampant inflation and if you own that bread, rather than the dollars you’re going to, you know, answer yourself from that devaluation and that’s what a lot of people are doing with swagger. And you’ve seen that happen both in the in the gold market a big rally now it’s come off a little bit, but definitely with real estate, definitely energy prices, and as well as the art market.
Jason Hartman 47:14
Yeah. So what is going on in the art market? Is it is it? Is it going crazy?
Scott Shellady 47:18
Yeah, I mean, they’re seeing all time record highs for art. And it’s, it’s partly because the one percenters and this is a another big discussion, but you know, there, there’s a place that they can put or people that have that capital, want to put it to store it, keep the dollar strong, or at least hedge themselves against that inflation. But at the same time, they’d also like to maybe benefit from a rising price. So there’s two things going on there anything or they say, only ever buy art if you really, really like it, but I think that with some of the things I’ve seen tea sold with some of the prices. I think it’s more of a store of wealth than something that’s actually a pleasing to the eye. So we’ve got a rampant art market. We’ve got a very healthy wine market. Silver and gold have also gone up over time they’ve backed off as of late. And energy. We all know what’s happening with those prices, and you’re a real estate expert. So those types of things are really where people are looking to continue to put their money because they don’t trust the stock market see. So there’s a lot of flow in that area. And that’s something that’s unregulated and illiquid. So those things need to be put out there to be NGOs or danger signs, but at the same time, they also can be very good places to put some of your money but not all of it.
Jason Hartman 48:27
And I think the distinction that has to be made in art is that it has to be really to have liquidity and the market is small for it but it needs to be really exclusive art. There’s a lot of this like middle market art, there’s this huge middle area of art that just it just really has no market I mean if you go to the website like art brokerage com you know, you can see the same pieces that have been sitting there forever offer by the same sellers. It’s just It’s kind of crazy like I just don’t think There’s much liquidity and that you know the value. They say, Well, okay, the value for your painting is $30,000. But is there a buyer?
Scott Shellady 49:08
Well, that’s it. That’s another old trader saying, I nothing’s worth anything unless you’ve got a guy that wants to pay something for it. So it’s only worth whatever the next bit is so
Jason Hartman 49:17
Right, exactly. That’s the ultimate appraisal. It’s not having an appraiser come over and speculate.
Scott Shellady 49:23
Right, so you right now it’s gonna be upper end things and, you know, the you can go I mean, even, you know, it’s the Leroy Nieman ish things that might get a little bit of a bid that way, but you’re right, there’s a lot of stuff in the middle area that you know, is either replicated or isn’t is, is exclusive, but those are the types of things that you know, can help. Maybe the average everyday investor puts a little bit of money towards something like a name and or you know, but at the end of the day, we are putting so much money to work here, that maybe when this inflation does pop, it pops pass on we all think or at least we don’t see it happening when it finally really does a very interesting well what are your other thoughts on that? The economy in general, I mean, you don’t believe that we’re in a real recovery do now and you know, I, I’m I’m kind of in my own camp on that a lot of people really want to see the world through rose colored lenses. And, boy, we have one good jobs number last November the eighth and we have a retail sales number that was okay the other day and all of a sudden we’re on a road to recovery. Well, every other economic figure that came out was bad. It was worse than expected. So we’ve got a situation here where we’re putting $85 billion to work and I’ve said it a bunch of times, but I want to stress how much money that is. And the best we can do is a one and a half to 2% growth rate. Yeah. I mean, aren’t we embarrassed? I mean, if I would have told you the inputs, about what we’re doing to stimulate this economy and put you in a vacuum room, you would have come on thinking, you know, we’ve got to be growing at five, six, maybe even 7%. But we’re not, but we’re not so we should be embarrassed me. This talk of keeper frustrates me because of we’re we’re still in Such dicey ground so
Jason Hartman 51:01so what you’re talking about is, you know, the talk about the Fed tapering, you know that that has been the the theory or the threat and they’re not going to do it now. Now we’ve got a new Fed chair coming on board. And I want to ask you about Janet Yellen too. But I mean, there’s they’re not going to taper, are they?
Scott Shellady 51:16
anytime the tapering is of the 85 billion are they gonna pull that away or how they’re going to pull it away, but if they pull the the party, the Punchbowl away from the party, per se, and we’re only managing one and a half to 2% growth. Now I, the argument would be that the reason that they pull it away is that we’re doing better and the economy can stand on its own. But I don’t think anybody can sit here and say that the kind of making stand anywhere on its own because of a 7.3% unemployment rate. 48 million people on food stamps. I mean, we are setting some records here, which are the opposite of the stock market record we set today. So we’ve got two different worlds we’re living in, and unfortunately, we’re trying to bring the gap between rich and poor closer but my Common aim the economy with this money that we’re doing every month every month. The people that own stocks are the people that own real estate. Or maybe the people that can afford to invest in swagger are the ones that are benefiting from all this money being put to work. And I think it’s leaving a lot of us other people behind. I think it’s leaving Main Street behind. And that’s why a lot of these economic figures are coming in so poor, those are all Main Street numbers, you know, foreclosures. I know that they’re declining, but that just means less people are going bankrupt. That’s not really a good thing. I mean, it’s starting to heal a little bit. But you’ve got other economic figures that are showing that, you know, we’re just not really getting off of our chairs and getting this thing back to work. So a large part of the economy, which could be arguing, and 99 percenters still are feeling the doldrums of 2009. So we’ve got two economies happening here. And unfortunately, what the feds doing is really only benefiting one of them, which is very interesting about how that’ll all end in the next five years.
Jason Hartman 52:59
century. So do you think do you think Janet Yellen will be more loose than Ben Bernanke and Greenspan, the ultimate Keynesian? Oh, really? Maybe Bernanke. He is I don’t know who’s worse. But do you think she’ll even be more liberal in her quantitative easing? Or, or do you think she’ll pull in the reins at all? I mean, just even a little bit.
Scott Shellady 53:20
Yeah, you know, the, everybody wants her to pull the reins. And, and, and everybody thinks they know who she is. And I think for every Fed chair, we all thought we knew who they were. In the end, the end, we didn’t. But I will say this, she’s entering. I mean, she’s entering a situation. We haven’t even touched on. Obama cares, arguably between 18 to 22% of our GDP. If that doesn’t go, Well, she’s going to have 20% of our GDP, take a little bit of a knock. The same time. We’ve got the high unemployment rate, maybe we’re going to need to see a bunch of jobs numbers in a row to change any of these bad feelings. There could be a you know, there could be a situation or an argument made that she might even put her foot on the gas and accommodate economy more now, on a percentage terms basis, Japan’s putting more to work and their economy percentage wise than we are for ours. So you’ve got some dubs that were dubs or people that think, Hey, we can put more economy and more money in an economy, we can cut interest rates more. Those folks think that, hey, we can do just that. Because look at what the rest of the world’s doing all these central banks are on a race to cut interest rates to zero and accommodate their economy with all this cash. So there could be a chance. I mean, there could be a chance it’s not talked about wildly right now because the market wants her to taper but or at least pull back on those. The money being put into the system, there’s a chance that she actually puts more in.
Jason Hartman 54:42
Yeah, so that means more inflationary pressure, folks, you heard it right there. So what do you think about the stock market? I mean, the Dow recently hit new highs. What’s such a joke about this CNBC and putting the big notices on the screen is they never adjust for inflation. It’s so radical. was, I mean, when it just got over 15,000 I said, Hey, nothing has happened yet. It’s got to be at 15,800 By my calculations before you even break even from the right.
Scott Shellady 55:12
And I’ve been doing it for 26 years and you know, 1996 we heard Alan Greenspan, as in irrational exuberance speech, right? Well, I’ve renamed 2013 irrational apathy. There were no media, there was no news trucks. We didn’t have anybody really cheerleading the rally because a lot of folks and rightfully so like in my garment, they think they feel as though because of the money being put to work in the economy. And the money managers that have fallen Kate my 401k everybody else’s 401k feel this pressure to get involved the stock market, they don’t want to be left behind. So we have this self fulfilling prophecy of this rally to the upside, and it feels manufactured. And I think that’s what most people are really out there feeling but just because it feels manufactured and you and I both think that doesn’t mean it can’t continue on for another two years. So like I said about, you know, what we were talking about earlier, sometimes, knowing what you think should happen versus what’s gonna happen. You can you can save yourself a lot of money by trading what’s going to happen or at least working around what’s going to happen and trying to benefit from that, rather than be the fly in the windshield and be dead. Right?
Jason Hartman 56:20
Very good point. Very good point. So what do you think the the strategy is for baby boomers and, and really Gen Xers now need to start thinking about it. I mean, if they’re older Gen Xers, they’re they’re getting close to to where they have to start thinking about getting serious with their their money and protecting their retirement. What can they do to shore up their finances so that they’re just not left empty handed at retirement?
Scott Shellady 56:45
Oh, gosh, the answer is one anybody wants who’s gonna want to hear because it affects me as well. But at the end of the day, you know, I own a money management firm and we’ve talked to people all the time and folks that are baby boomers are now starting to retire to get a wall, baby rumors that are becoming true. And they can’t really afford to have the stock market back up 20 or 30% of them have some cataclysmic catastrophic crash. So they’ve been backing money out of the stock market. And really the only place they can put it to keep it safe is in bonds will a 10 year bond is high today at 2.8% for 10 years, which is still ridiculous, ridiculously low. So, and I’ve written a piece about this as well. Unfortunately, we’re going to see more 90 year olds serving as ice cream, the Dairy Queen, and I might be one of them. But the best way, the best way to shore up some of these these portfolios is that we’re gonna have to work longer. I mean, there is no there’s no easy way out because I can’t look a 77 year old person in the face and say I need you to be 5050 stocks bonds, because that would be just a disaster to their portfolio. If we had a real big backup in stocks, some you know, there are even people out there now. Predicting dow 2000 2000 I
Jason Hartman 57:58
mean That would be a complete collapse. I mean, I don’t
Scott Shellady 58:04
know, I don’t think they’ll ever allow that to happen because they can just print more fake money in, you know, 2000 real value in real dollars but not a nominal? Well, I mean, and where those two lines cross and those lines are this, when the government’s continuing with this, it’s a, it’s a combination versus one that growth comes, you know, so they’re going to, they’re going to accommodate to some degree until we can finally see that growth and then things will get safer. And then I can say to the seven year old, well, you know, you can have a little bit more inequities now, because I think this is healthier. But right now, there really is no good answer. I mean, the best answer is that you’re going to have to put into your plans working longer and longer than you ever thought in order to save and be able to be okay in your older years. Because I’m one of them. I’m not trying to tell anybody that I’m not I’m 50. So, we’re going to have to do that in order to stick around because I can’t really take a huge hit to my 401k No, you know if I’m getting out in 15 years, so The kids at 2025 30, but they don’t have a ton of money, but they’re the ones that are going to be invested heavily in stocks right now. And there really isn’t a cheap answer, except for, we’re gonna have to work longer. And I hate to say it, but that’s, that’s, that’s a lot.
Jason Hartman 59:14
You know, I really don’t think that’s such a terrible thing. I mean, the whole concept of retiring at 65 was created, you know, it’s an industrial era. It’s an artifact. Okay. I mean, it shouldn’t be that way. People should be working longer. And I don’t say that is like an obligation they should want to you retire you you die. I mean, people know that. It’s proven that when people retire, they don’t have a purpose. They don’t have a sense of purpose. Usually. Now, sometimes they have some other big fulfilling sense of purpose. I mean, but the point is, to stay engaged, stay interested and to work because you want to not because you have to, because it’s interesting because you feel you’re contributing to the world. you’re contributing to yourself. You’re growing, you’re thinking you’re engaged. And you know, it keeps you sharp, hopefully not because you’re an indentured servant and you’re a Walmart greeter,
Scott Shellady 1:00:08
okay. And then, you know, to your point, you know, that Industrial Age retirement thing, you know, as a percentage of the life expectancy, we should expect to work longer, because we live a lot longer. Now, you know, back in the days when they, you know, when social security was put forward, you know, those, we need to start making those expectations. And we’re building those into our customers plans as well. And generally speaking, I think a lot of people have come to accept that anyway. So here we sit in an environment where we’ve got a manufactured stock market, we’ve got very, very cheap money for 10 years. So it’s going to be difficult for you to pile all your money into the 10 year interest rate, and your bond letters are going to look not good. So that’s going to be pretty much the common sensical solution where you’re going to be able to, you know, store some wealth, you know, maybe, maybe if you can afford it by some of the other things that we talked about with swagger but The other day, you’re going to have to work with a lot. You don’t have to work your, you know, your 80 hour work weeks, but you’re gonna have to keep some income coming in. It’s not, it’s not something you’re gonna have to have a ball and chain around your ankle, but you’re gonna have to keep some income coming in.
Jason Hartman 1:01:11
Yeah, right. Right. Exactly. Well, any other points, you’d like to make predictions on the future? Just ideas you want to close with any other thoughts?
Scott Shellady 1:01:19
You know, I do think I do think there we need to talk about and this could be another talk sometime later. But we need to talk about that inflation problem, which I think could rear its ugly head before we actually know it because there’s going to be some point in time where things do catch fire, and maybe it’s three or four jobs numbers and, you know, for three or four months of the jobs numbers, where that does finally happen, but people have got to be ready for that a in their borrowings because a lot of people might be going month to month on some sort of interest rate, but you’re going to see those types of things, make sure that your borrowings can handle a doubling of the interest rate. So that’s, that’s, that’s a big deal. percentage change versus the actual change. Well, two to four percent doesn’t seem like a big deal. But it doubles your payment. So you have to keep those types of things in mind. So keep keep in mind a sudden change to inflation, I think it’d be okay. Because that really is the thing. I think that’s going to erode people’s wealth going forward.
Jason Hartman 1:02:13
So, so long term fixed rate debt, hopefully attached to some of the swagger items. I love it when it’s on real estate, because inflation and inflation actually works for you. It pays your debt off for you, you know, in that case, it devalues your debt, which is which is awesome. That’s what we want, right? But but it’s got to be fixed rate, folks, because it’s just too risky to have adjustable rates and this kind of uncertain market. Good stuff, Scott, give out your website, tell people where they can find you.
Scott Shellady 1:02:41
Well, we’re at WWW dot the train group. com My face will be on the front page there. You can get in touch with me on that one. That’d be probably the best and most easiest way
Jason Hartman 1:02:53
and I just want to I just want to spell that for everybody. It’s it’s tr EA n group.com. Yeah. Good stuff. Well, Scott show today. Thank you so much for joining us today.
Scott Shellady 1:03:03All right. Thank you, Jay.
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