Announcer: Please note disclaimers at end of show. 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 multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 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 InvestorsTM.
Jason Hartman: Welcome to another edition of the Creating Wealth Show. This is Show No. 113 and I’m your host, Jason Hartman – glad you could join us today. I’ve got a special guest on the line with me and we’re actually starting the show on the phone today and then we’re going to go to an interview with the very famous and very controversial, does not want to be called a gold bug, Howard Ruff, in just a moment here.
But first, I wanted to introduce Doug, who is the editor of our newsletter and he is a client and just kind of have him talk about what his game plan is and what his impressions are and what’s going on out there. He’s researching this constantly and just thought we’d open the show before we get to the interview of Howard Ruff that way. Doug, welcome.
Doug: Hey, welcome, Jason. How are you doing?
Jason Hartman: Good good. Well, first of all, Doug, I guess just tell us for a moment how you came to be involved with Platinum Properties Investor Network.
Doug: Okay, so, I started out like a lot of people just absolutely following the Wall Street line just hook, line and sinker. I was an absolute full believer in the stock market. I just thought I just need to save some of my money, put it into my 401k. And I thought that I’d grow and retire ridiculously rich. As most of us came to discover, that didn’t quite pan out the way that we’d all expected. And right about the time that my stock market investing career wasn’t going the way that I thought it would, is when I actually ran across your product and when I talked to Sara on the phone. And Sara eventually really got me onto the idea of investing in income properties. And I eventually purchased one in Indianapolis, that’s just producing some phenomenal cash flow, and have subsequently bought one more. And then afterwards, you and I talked and we came up with the idea for having an investor newsletter that really runs contrary to the mediocre cookie-cutter advice you’re used to from Money Magazine, Forbes, and all the other $4.95 slick rags that you’ll see.
Jason Hartman: But I can’t imagine those magazines don’t have good advice. You mean, when you read on the cover of Money Magazine, “Retire Rich – Invest in these Mutual Funds” – are you telling us that doesn’t work?
Doug: What I’m saying is when you see it from the one side you see, “Oh, look; an ad by Goldman Sachs. Oh look, on the other side an ad from Vanguard. Oh look, T. Row Price.”
Jason Hartman: Merrill Lynch, Ameriprise, etc. Yeah.
Doug: It’s not necessarily that they don’t know what works; it’s just that they’re doing their job. And their job is to sell advertising.
Jason Hartman: Right. Yeah, I hear you. As far as a stock market investor, you’re a pretty technically oriented guy. When you were convinced that the stock market was the way to go, you were analyzing, from a very technical perspective. Maybe you want to tell people about what you do in your day job, too.
Doug: My day job is actually working for the Intel Corporation. I do pricing analysis for our desktop microprocessors. Yes, there’s quite a bit of spinning numbers that’s involved and a lot of complexities, not dissimilar to the stock market. Although, I have to admit that the thing that really got me in was that basically I started investing in the mid 1990’s when the stock market had gone through a very extended series of frankly, phenomenal rates of return.
And the thing that’s really odd is you can have something that just expands ridiculously. And as long as it does it for an extended period of time, people will just assume that it will continue to do it for – actually out into infinity. That’s because, you know all the stock market models, by the end of the late ’90’s, had been basically set toward, “Oh, well the stock market always expands at 10 to 20 percent per year and it’s going to continue to do so because stocks are such a great investment.” And since there hadn’t been a major correction in so long, everybody just assumed that was going to be the case, myself included. And oddly, when you have an assumption you’re trying to prove, you can come up with all kinds of really cool models to convince yourself you’re right.
Jason Hartman: Right, exactly. As soon as our mind focuses on one thing, we start looking for all the evidence out there in the world that supports our belief system and sometimes that belief system is incorrect. And there are a lot of mistakes made throughout history. It’s replete with examples like that, right?
Doug: Yeah. As I’m fond of saying, I was almost a statistic when it comes to stock market investing.
Jason Hartman: Tell us, since we’re interviewing Howard Ruff here in a moment, he is such a famous guy and has such an interesting background, interesting career. Of course, you’ve heard of him and he wrote the book, I think called, “How to Survive the Coming Bad Years”. And he wrote that in the ’70’s and, of course, the years just got better and better really. And he was one of the people saying, “Buy gold. Buy gold, etc.”
And when I asked him before I interviewed him – and the interview is, I don’t know, maybe about three weeks old now, so it’s pre-recorded, but when I asked him, I said, “You know, Howard, are you a gold bug?” he said, “No, no, no. I’m not a gold bug.” And I was thinking, “Gosh, if anybody deserves the gold bug title, it would be Howard Ruff.” I mean, he’s a famous guy. He’s been pushing metals for a long time and I don’t want to kind of mislead anybody who might be a new listener and hasn’t listened to the show before. But in our prior 112 shows, I’ve talked many times about metals because I think what’s really interesting about all of the precious metals people out there is that they have a very accurate premise, they just have the wrong conclusion.
Their premise of the Federal Reserve debasing the money supply and the government over-spending and the uncertainty in the world geo-politically – that is all true. The problem is the conclusion of “Own precious metals,” is trying to be portrayed as an investment rather than money. And what I like to say is precious metals, gold and silver, they’re just money – big deal. It’s like saying, “If you hoard a bunch of cash, you’re going to get rich.” Well, we know you’re not going to get rich hoarding cash because it’ll be debased by inflation. Metals are just money. They’re not an investment. It’s kind of like trying to sell an annuity or life insurance as though it’s an investment. No. It’s just what it is. It’s a product. You know, life insurance is life insurance. And you’ve got these thousands of people, tens of thousands, maybe hundreds of thousands out there trying to sell life insurance as though it’s an investment of some sort. And it’s just not.
And I don’t think metals are really an investment. I think they’re just money. And money’s great. It’s better than not having money. But it’s not going to really grow well. It’s amazing to me, Doug because I know we’ve talked about this and that’s why I want to kind of set up this question for you. How there’s this community of people out there who’ve been saying for three decades all the reasons why you’ve got to buy gold. Gold is about to soar. And I listen to these commercials on talk radio from Leer Financial and it’s like they’ve been saying the same thing forever. It never really changes that much.
Doug: One thing that I do think is kind of funny is you look at all the gold commercials and they say, “Gold may hit $1,500 in five years,” which would be about a 50 percent return, which is about a compounded annual growth rate of about 8 or 9 percent, which is-
Jason Hartman: Yeah, there’s no leverage, no tax benefits, no income, no cash flow – right. Go ahead.
Doug: No income, no cash flow, about an 8 to 9 percent compounded growth rate. It’s just more or less the same as stocks, except it’s not going to be debased by inflation. It’s better than putting your money under your mattress, but you and I have discovered that you can do quite a bit better.
Jason Hartman: With income properties. So, tell the listeners just for a brief moment here before we go to the interview, Doug, about your experience with Platinum Properties Investor Network. How did you find us? You just found the podcast on iTunes?
Doug: At the time, I was looking to diversify my investment strategy. I’d heard about all these people making this money in real estate, and I was like, “Well, yeah, I need to get on that band wagon.” And so, then I started surfing through a lot of the podcasts online and I found a whole bunch of hour-long sales pitches. Now occasionally, they were pretty good to listen to because if you listen to it for an hour you can catch maybe five to ten minutes of reasonably decent information. And then, of course, it went back into the “buy my $5,000 system.” But what really caught me about your podcasts was that you basically spent the whole time communicating useful information and I didn’t detect a hard-sell.
So, naturally, just being the relatively curious guy that I am, I started clicking on your website and I was just intrigued by your system, just because where most people stop is, it’s “Come to my $5,000 seminar, buy my $1,000 system. And then I’m going to go and tell you how to do everything. But I’m not going to actually help you with any of it. Or, if I do, then you’re going to have to pay $2,000 a month for a coaching program.” And just the thing that really got me interested in your complete solution is that it’s front to back. It involves coaching up front, it involves help with selecting your property manager, finding the properties, and then follow-up on the back side. I just think that your team really has an end-to-end complete solution that I don’t think has been replicated anywhere else in the market.
Jason Hartman: Yeah. Thank you. And you know what? I haven’t found it anywhere else either. There are a lot of people sort of out there that portray themselves to be like Platinum Properties Investor Network, but I think we’ve really sort of got it down with that complete solution concept, the five steps. And you purchased your first two properties for us, I believe – I know the first one was in Indianapolis, which is one of the few markets we recommend in the more Northern regions. We like the southeast and the mid-Atlantic mostly. And then was your second property also in Indianapolis?
Doug: Yes. The reason why I did the second property in Indianapolis was because there was another case where there was a very attractive cash flow opportunity. And I also wanted to take advantage of just some economies with the property management company because when I did the first property, for example, you know I had to line up an insurance agent, a property management company, and a bunch of the other things. Now, clearly, I am planning on diversifying out of Indianapolis for my next purchase. But basically, I just wanted to realize some efficiencies with my second property.
Jason Hartman: Okay. How did your properties go? I remember – I mean the way that we sort of met really I know you were listening to the podcasts. You eventually called or went to the website and then you got in contact with Sara and she’s your investment counselor here. And then later, after you had purchased your property I remember we linked up on Facebook and I didn’t know you. I had never spoken with you, but you sent me a note saying that your property was a 1.4 RV ratio (rent-to-value ratio), which I thought, “That’s fantastic,” and we’ve had a lot of other clients achieve that, too. But even if it was half of that it would still be a very good solid investment. What went on with your properties? I mean, did you rehab them? Tell the listeners a little bit about it, if you would.
Doug: Sure. So, what happened was, when I closed the property then the realtor that I was working with, a very skilled young lady named Angela, who I would highly, highly, highly recommend to anybody investing in the Indianapolis area. Let me know if my shameless promotion is going over the edge here. But anyway, she set me up with actually a choice of a number of different contractors, a choice of a number of different inspectors. She doesn’t have anybody captive. She said, “Here’s the people that I usually work with.” But you know, she wasn’t trying to say, “This is who you have to do your rehabs through.” And then the rehabs work was through Dorfman Property Management, who I worked with. The people there are just phenomenally easy to deal with.
And then after the rehabs were done – it was a pretty simple rehab. It was basically just carpet, flooring, paint, and appliances – very frequently, the things that you have to fix when you’re doing foreclosure rehabs. But after about what – less than a month of rehab time, it was ready to go up on the market. And by rehab time, I mean from the time I closed until the time it was ready to go up, was about a month, month and a half. And then right around a month after that, we had the first tenants in and it was leased up and it’s been leased up ever since then. It’s just been absolutely great.
Jason Hartman: Fantastic. And the second property, did you want to mention anything on that one?
Doug: So, the second property was actually a kind of an interesting one because there was one that I’d looked at because I liked it because it had a really low down payment. Now this was before your Atlanta properties, but I was looking at this one, I was like, “Wow, only $16,000 down. How could I ever beat this?” I put an offer for this one in and it was accepted, but then the bank just drug their feet and drug their feet and drug their feet. And then so what Angela did was she actually found me a better deal that was in the same area that was newer and had better cash flow potential. So we ended up backing out of that one and then purchasing this other one.
And for financing this other one, I was actually able to get a line of credit on my current house, my primary residence, and then just write a check for the property. And if any of your investors can just do that, can just take out a line of credit and write a check, oh, it’s so much easier to close than if you have to go through and do all the financing. But then, of course, the nice part is that once you’re closed, you can certainly refinance based on market value and not have to worry about trying to get all that timing done while you’re closing the property.
Jason Hartman: Sure.
Doug: But then, otherwise, the rehab is already done and Dorfman is working on getting it leased up.
Jason Hartman: Good deal. Anything else you’d like to tell the listeners just about the newsletter? We are working actually on a coaching program as well, which is exciting. And Doug, what you do as your side business while working at Intel is you do some coaching as well. So we are going to apply some of that coaching to the investment side of the business. But it’s not going to be these outrageous prices like you see some of these other coaches trying – I cannot believe they actually get away with this and people pay it. Talk to the listeners about that just for a brief moment.
Doug: Oh, okay let’s go ahead and start with our newsletter. So, anybody who’s seen the page on your website knows it’s called “Jason Hartman’s Financial Freedom Report”. And the idea behind this newsletter was that there are just oodles and oodles and oodles of financial journals out there that are just pedaling the exact same cookie-cutter, mediocre advice: save money, buy mutual funds; put money in your 401k, etc. Save money and maybe you’ll have something when you retire, that’s assuming the stock market doesn’t collapse or there’s never 40% inflation.
And then the other side of the coin is you have people who have alternative theories, but basically what they say is, “Here, buy this product. Go out and buy gold. Just trust us.” Or, “Go out and buy foreign stocks. Just do it. Just trust us.” Yeah, I was just kind of not very impressed with either strategy because, on the one hand, you have Wall Street, who’s really, really, really great at planning, but then tries to force you into a really rotten investment. And then you have this other side that does almost no planning and tries to put you into better investments, but doesn’t really make much of an effort to provide any education on the underlying economics or try to describe the fundamentals that they think are pushing the market in the direction they’re recommending.
And so really, for the Jason Hartman Financial Freedom Report, we’re trying to do both. We’re trying to, on the one hand, really offer phenomenal investments – like you said the investment properties, with the leverage adjusted rates of return that are very, very attractive. I won’t quote exact numbers because they range. But they’re all much better than you’re going to find just about anywhere else.
The other part that I think is really important is the education aspect. One of the things that we always try to focus on is what’s happening with the stock market valuation relative to earnings per share? What’s happening with the money supply? What’s happening with the credit markets, with the economy because reading the Financial Freedom Report over an extended period of time will not only help you to say, “Hey, this is the best way to invest.” But it will help you say, “This is the best way to invest because x, y, and z. Because you know, and, and, and, and, and.” And as you become more and more educated, you’ll be able to see the forces that are making investment property such an attractive investment and that are pushing against things like the stock market, or other investments of that variety.
Jason Hartman: Okay, good. Good stuff and the coaching.
Doug: Yeah, the deal behind the coaching is that any good investment program is going to require really solid strategy. And now, one of the things that your office does is you guys offer just absolutely phenomenal investments. When I first learned about your system, I was just blown away with the potential. But I think that for a lot of people – a lot of people that are a little newer to investing – what they need is probably a little bit of help formulating their strategy and developing their financial education so that they can take those really great investments and make them into, pardon the phrase, a more holistic financial strategy. And that’s, frankly, the purpose of the coaching program.
Now granted, when you start aligning your financial strategy, then there will certainly be side benefits as well, just because no coaching program is really complete if you just focus on one aspect of your life, like just finances, or like just your mental or internal wellbeing – it really has to be a complete package. And I think that’s one of the advantages of our coaching program versus something else that’s focused on one area to the almost complete exclusion of other areas, when the truth is that it’s all really connected.
Jason Hartman: Yeah. Absolutely, it’s holistic. That’s a good way to put it. No question about it. So, listeners, more to come on the coaching program. If you’d like a free sample of the newsletter, just go to www.JasonHartman.com, click on the “Members Only” section. You can get an audio sample, a PDF sample, or a turning page book sample. Anyway you like it, the newsletter is delivered. That’s the Financial Freedom Report and it only takes about 30 seconds to join as a member. It’s totally free, so be sure to take advantage of that. Doug, any last thoughts on gold bugs and investing before we go to the interview with Howard Ruff?
Doug: Well, most of it you’ve already covered, but the gold bugs, they have the premise absolutely right. I just think it’s one of those things where there are ways that you can produce much greater returns than just something like gold or silver or just something like foreign stocks. The power of leverage and fighting inflation almost cannot be over-expressed. And it’s something that is very drastically underreported in the traditional news media. And people that learn about it and do it are going to to realize some really, really fantastic gains.
Jason Hartman: Yeah. Good stuff. Alright, well Doug, thanks for joining us today in this little introduction. I appreciate the thoughts. And let’s go to the interview with Howard Ruff.
Interview with Howard Ruff
Jason Hartman: With great pleasure, I’d like to welcome Howard Ruff to the show. He is a very well known author. His most recent book is “How to Prosper During the Coming Bad Years in the 21st Century” and that was published in 2008. Howard, it’s great to be talking with you personally.
Howard: Well, it’s great to talk to you. I can hardly wait to hear what I’m going to say.
Jason Hartman: Me, too. So, tell us about your take on the current economy. I mean it’s pretty disgusting what’s going on out there with the money printing and the bail outs and rewarding the wrong behaviors. And the moral hazards and so on and so forth. What is your take on stuff?
Howard: Well, you got it all just right. My take on it is that – and it’s the conclusion I’ve drawn and that I’m viewing with alarm, like I’ve never done in my entire career. The problems that we face amount to socialism. We used to be creeping towards socialism. Now we’re galloping towards socialism. And I see Barrack Obama, I hesitate to say this, but if he isn’t the antichrist, he’ll do until one comes along.
Jason Hartman: He is definitely moving us toward a very big government. A lot of draconian rules and-
Howard: Well, not just that. The thing to remember about him is the definition of socialism. Socialism is government owning or controlling the means of production. All socialist economies do it. That’s the definition of the term.
Jason Hartman: Sure.
Howard: And now he’s taken over the automobile industry. He’s taken over Wall Street. He’s taken over the insurance industry. And what he’s done is given them money with strings attached. He claims he’s not going to make decisions for them. That’s a bunch of baloney. What he’s doing at General Motors, he’s already fired the CEO. At AIG Insurance Company, he’s already said, “Oh, we can’t pay these guys’ bonuses.” Even though they’re working for a dollar a year plus bonuses and they’re the best producers they have. And he’s step by step taking total control. And I was interested that Barney Frank, Congressman of the House, said that he thought we could control the salaries and payout bonuses of companies that even haven’t received moneys from the government. And that just scares the wits out of me.
Jason Hartman: That is very scary, yeah.
Howard: There’s strings attached to the money and government has big strings attached to all this money. But remember what Rahm Emanuel said when he became Chief of Staff of the White House. He said, “You can’t allow a crisis to be wasted.”
Jason Hartman: Yeah. And let’s never miss the opportunity to use this crisis to promote our agenda.
Howard: For example, when they did that $700 some odd billion bail-out package, it had like 40 years of what the liberals in Congress have wanted for 40 years, and nobody had a chance to read it before they voted on it. They finished about 11:00 at night the night before they had the vote. No one, not one person who voted for it had read it before. Not one.
Jason Hartman: You know what’s interesting about that is that I remember Obama during the campaign promising that he would put everything up on a website for five days so the American people could review stuff before votes were cast, so they’d have time to react and you know write to their representative and so forth. And these kinds of things were just rushed through. But you know Bush is not free of blame either. I mean Bush and Paulson, between the two of those guys, I mean they were a little less socialist, but it started to get pretty big in terms of the size of the government under Bush, too.
Howard: Well, what we have to remember is that most of this has been approved by Democrats who initiate a lot of this stuff, but backed up by weak-kneed Republicans.
Jason Hartman: Right.
Howard: Who were just basically enablers. So, you know years ago, remember when Papa Bush said, “Read my lips. No new taxes”?
Jason Hartman: Yeah.
Howard: He said that to me on my TV show. I’m the guy he said it to.
Jason Hartman: Wow.
Howard: When he did, I decided to abandon the Republican Party. I’m much more in tune with the philosophy they profess, but I’m not in tune with the way they practice it. And consequently, I resigned noisily from that party and publically and so I don’t know what I am. I’m not a libertarian because I don’t like their philosophies. I’m certainly not a liberal. I’m more in tune with the state of Republican philosophy. But they don’t do what they say they’re going to do. They just don’t.
Jason Hartman: Well, when you say – I mean Bush got really vilified for the “read my lips, no new taxes” thing when he ran the second time – I’m talking Bush Sr. of course. It wasn’t really he who promoted more taxes; he just caved in. He didn’t stand up to the big government liberals, right?
Howard: Well, actually, he endorsed it.
Jason Hartman: Oh, he did? Okay. Well, it must have been a trade-off or plea bargain then.
Howard: Oh yeah. He actually endorsed it.
Jason Hartman: I don’t remember that.
Howard: Yes, he actually endorsed it and that’s why I resigned. I didn’t want anything more to do with a party that would do that.
Jason Hartman: Well, tell us your philosophy on why controlling the means of production and increasing – I mean to me taxes are just a contemporary version of slavery. And the government has to tax a little bit so you don’t have anarchy, but it’s been blown so far out of proportion with what’s going on nowadays. Give us sort of your philosophical underpinning for that, if you would? And then let’s take this into how one reacts to this? How one invests? How one protects themselves?
Howard: You mean defending the definition I gave you?
Jason Hartman: Yeah.
Howard: I don’t have to defend the definition. Ask any economist – go down to the grass roots, they’ll all agree with that. That’s the definition, the actual true definition of socialism. And every socialist country – there have been a lot of them; the Soviet Union was Socialist – Union of Soviet Socialist Republic. The Nazis were, too, but the National Socialist Party. Britain is socialism. All of these things are governments eventually getting control of industry. Now that this, the Obama administration has taken control of the automobile industry, they’ve taken control pretty much of the insurance industry. They’ve certainly taken control of Wall Street. And I don’t see that as anything but the purest definition of socialism. The only hang-up is that they find that they have to control people’s behavior. And so, all socialisms eventually turn into totalitarian systems – a totalitarian elite that tells you what to do.
Jason Hartman: That’s the link I’m looking for actually. I didn’t mean for you to go into that much detail on it, but what does this really mean to people because nowadays, this is all being soft-pedaled as though, “Maybe the government can run it better.” These are crazy statements to me.
Howard: Praise God! When has government ever run anything well, except maybe the wars?
Jason Hartman: And that would be debatable, too.
Howard: Well, let me tell you this. The one thing that happens under socialism is that they throw a lot of money around. In fact, today, the government knows they’ve got a recession. They know they have a deflationary period. They don’t know anything to do, but except to throw money at it. Well, in the process of throwing money at deflation and recession, they’re laying the foundation for inflation coming around the corner.
And so we’re just a few months away from all of this money they’re printing turning into inflation. Inflation is at all times and all places a monetary phenomenon. Now when inflation picks up, you can bet that this administration will go to price and wage controls. That always creates shortages. I remember when my wife and I were on a cruise and we stopped at Leningrad in the Baltic, and we were on a bus and all of a sudden when the bus got stopped in traffic, we saw all kinds of people running and we don’t know where they were and I found out some of them on our bus spoke Russian and found they were running for a store because the rumor was out there was something that was for sale there that had been scarce. They didn’t know what it was; they just wanted some because the shortages that were created by wage and price controls were immense – they were tremendous.
Jason Hartman: I remember one time I was in Moscow and I was with a tour guide on a bus tour in Moscow, Russia, and I always, whenever I go to these formerly communist countries, I always ask a lot of questions about it. And she was telling about how they had to wait in line for shoes. One time, she waited in line for shoes for 16 hours. And it’s cold in Moscow, too, in the winter. And it was very cold out and people were just lined up to get shoes. And by the time they got in to get their shoes, they didn’t even have her size. So you just took whatever you could get and you figured you’d trade it later. I mean what a ridiculous loss of human productivity. And it’s just so inane how people think these systems actually work.
Howard: That always happens under socialism.
Jason Hartman: Yeah.
Howard: They all turn to some kind of totalitarian government. Fascism, Nazism, Soviet Union – they all have to do that. So we find our lives being run by an elite that controls everything for everybody else.
Jason Hartman: And it sure seems like this elite is pretty far from the American people. They’re paying people out. I mean, Obama, when he did the auto deal and he just sort of abandoned the bond-holders, the people who created the capital for the company, in favor of the UAW, it just reminds me of that George Bernard Shaw statement, Howard, which says, “A government that robs Peter to pay Paul, can always depend on the support of Paul.” So, they’re just buying votes.
Howard: Well, the thing that’s amazing is that the bail-out of General Motors started out with George Bush.
Jason Hartman: Yeah.
Howard: The political pressures to turn socialist are irresistible because it always promises a lot of things. And right now, half of the people in America don’t pay any taxes – so, no constituency for controlling taxes. Half of the people in America get a check from some level of government. So there’s no constituency for cutting government spending.
And there was a poll recently that found that half of the people in America were confused over what might be better, socialism or capitalism? And they didn’t have the slightest idea what either one was. And I don’t think Barack Obama knows that. All he knows is that there are promises to people who’ve been getting checks from levels of government. Especially young people, they’ve always gotten checks. They got checks from their parents, they got student loans. They just have great expectations of promises.
So, based on promises, countries turn to socialism. They always do. And the inflation that we’re looking at, which is basically a collapse of the value of a currency, every currency lasts maybe 75, 80 years. That’s the lifespan. That’s how long they last. Ours has been around for 80 years right now. And so, inflation is not rising prices any more than wet sidewalks are falling rain. Inflation is simply the dilution of the capital by making more of it, decreasing its value by making it common. Then inflation eventually reflects itself in higher prices because inflation to an economist is not rising prices. Inflation to an honest economist is in the diminishing of the value of currency by creating more of it.
Subsequently, all this money that’s being thrown around right now – these trillions of dollars, and I’ve been in all the years of publishing, I’ve never used the word trillions before. I didn’t think it was possible. But all these trillions they’ve been throwing around, they’re going to create a massive inflation that I predict is going to start by the end of this year. And Barack Obama is going to pay himself into a corner with it. And so, right now he’s fighting deflation and recession. One of these days, he’s going to be fighting runaway inflation. I bet you anything, with their mentality, that they’ll turn to wage and price controls and create shortages. And that will be followed by people taking over everybody’s lives.
The whole idea is we’re on the cusp of socialism. We really truly are. And the average person doesn’t have the slightest idea what it is, slightest idea what causes it. And so, a small minority is going to make money. You know, I’m a maverick. A maverick is a cow that’s left the herd. Well, the herd is still on Wall Street. They’re doing what their financial advisor tells them to do. And that herd is all going to be turned into hamburger.
And a small minority is going to make a lot of money out of the mainstream. Not doing what Wall Street says, but doing what they know will make them money. What they finally become convinced will make them money.
Jason Hartman: I couldn’t agree more. I think you’re absolutely right.
Howard: Well, good for you. Hey, that makes you a real smart guy.
Jason Hartman: When you talk about most of that herd being made hamburgers and then you talk about the shortages that will eventually follow the inflation, when you have price controls, it actually just happened in Zimbabwe, which is sort of the poster child for inflation. Their currency is worth the paper it’s printed on basically, which is what all fiat currencies become – paper and ink value. They instituted price controls and they said that the shopkeepers would be arrested if they raised prices any more. And so guess what happened, Howard? What a surprise.
Howard: Shortages. Goods disappeared.
Jason Hartman: The shopkeepers just said, “I quit. I’m not going to do it anymore. Why am I going to run a shop, if I have to pay certain prices for goods and I can’t resell it and make a profit? I’m out of business.” So then there are just price controls and then there are just shortages. And it becomes this unproductive deadly spiral into socialism and central planning.
Let me talk to you a little bit about gold, if I could, and debt. I had Pat Buchanan on the show and I couldn’t have quoted him better than when he said this, after I’d explained our strategy. And by the way, since we’ve only talked for just maybe two or three minutes before we stated recording and I’ve never talked to you before, I want to explain our investment philosophy a little bit and see what you think of it because I’ll be very interested. We believe in investing in little inexpensive rental properties where, basically, the land is free and you’re basically buying the commodities, the construction materials – the copper wire, the petroleum products, the glass, the steel, the lumber, the concrete, the energy that it takes to assemble a little inexpensive modest rental house, in areas were land is either free or cheap and we’re buying them far below actually construction costs nowadays.
And then we believe – so there’s the commodities investment – what I call “packaged commodities” investing. And then we believe that you should use as much long-term, fixed debt as possible, so long as the property is self-sustainable and there’s positive cash flow because you get three decade debt at artificially low interest rates and I’m sure you think rates are going up. I sure do. And Pat Buchanan said, “You know, Jason, that’s a pretty good strategy because basically, their debt will be floated away on a sea of inflation.” And I thought, “I couldn’t have said that better myself.” It was very quotable. What do you think about that idea?
Howard: Oh, it’s okay, except timing is the problem. Right now – when I wrote the “How to Prosper in the Coming Bad Years” back in 1978, I recommended real estate as an inflation hedge. So why aren’t I recommending that now? Because real estate, residential real estate is still in free fall and it hasn’t bottomed out yet. Well, as a financial advisor, I want to buy low and sell high.
Jason Hartman: But doesn’t that depend on what market you’re talking about? I mean, certainly in a country-
Howard: It’s essentially universal. Yeah, you could pick out markets where it’s not happening. But it’s just about universal. And I think the upshot of it all is that the residential real estate will become a good inflation hedge and your strategy will work. But right now, trying to buy real estate now because people think it’s near bottom is sort of like trying to catch a falling safe.
Jason Hartman: Yeah. I agree with you and I think in markets that are the bubble markets where you’re paying for a lot of land value in that equation, like anything in California, most of Florida, the Northeast, the expensive markets, none of those make any sense. But if you look at like Texas last year, the three top appreciating – I did say appreciating by the way – markets in the U.S. were in Texas doing about 4 percent annually, which you combine that with leverage and free land and buying below construction costs, that to me seems like a pretty good equation and I know you’re a gold bug. So I want to talk about gold and metals in a moment.
Howard: I’m not a gold bug. Let me put the sequitur to that.
Jason Hartman: Ok. Go.
Howard: First of all, I was on a talk show recently and someone said, “Oh, I know you always buy gold.” No, that’s not true. I’ve been publishing for 34 years. I’ve been bullish on gold and silver for 12 of those years. My job as a financial advisor is to be right for the times, and different things at different times. Sometimes I’m bullish on the stock market, on bonds especially. Sometimes I’m not and I’m bullish on the precious metals. Right now, we’ve gotten into a situation where the fundamentals say Will Rogers was right, “Invest in inflation; it’s the only thing that’s going up.”
Jason Hartman: That’s a good quote.
Howard: And I think that I became bullish on the metals again in late 2003.
Jason Hartman: That was good timing.
Howard: After about 12 – 15 years of being bearish on it. My job is to make money for my subscribers and if gold starts running – let me read another quote – Yogi Bara, he said, “It’s déjà vu all over again.”
Jason Hartman: I love Yogi Bara. He cracks me up with his quotes. They’re so funny. But yeah, it is déjà vu all over again, isn’t it?
Howard: It is and I burst into the scene in the mid-’70’s and that was my recommendation was gold and silver because it was right for those times. And we made a lot of money in gold and silver. Like when I started recommending gold in ’75 it was $105 an ounce and silver was under $2. Gold eventually peaked out at $850 and silver at $50. So the point is I made people a lot of money and everybody figured I’m stuck in the past. I’m still bullish on gold and silver. That is baloney. I’m bullish when the time is right. The time happens to be right for now.
Jason Hartman: Yeah, and I would agree with you. The only reason I’m not such a gold bug and I hate to use that term, but I just said it so I’ll just stick with it, is that gold and silver are definitely better than fake money – dollars, currency – because they are real money. But they have a few flaws. They don’t produce income. There’s no financing available. No tax benefits, no one will rent them from you. And most of all, and I’m sure you can speak to these two quite well, is that they’re subject to confiscation, possibly. I know it happened in the ’30’s. And also subject to manipulation because the central banks want to see gold pushed down. They want to see silver and gold constantly manipulated and pushed down because they’re in the business of fiat currencies. And what do you think about those five characteristics that – they don’t make them as pleasing to me.
Howard: Yeah, all those characteristics are avoidable if you chose wisely. And that’s what I advise my subscribers to do. I show them how to invest in it. For example, I can give you some other things that are fraudulent about it. When gold is taking off, the sharpies come out assuming that it’s a big emotional moment and they can get people to go for their frauds. And there are all kinds of frauds, like, “You don’t have to take the metal home. We’ll store it for you.” Well, you don’t know they’re actually storing it. And a lot of companies are not doing it. They’re cheating. And there are all kinds of problems. But they’re all avoidable. And so, I have four recommended dealers that deal nationally. Not because they’re the only good ones, but because I’m getting old and more than four is too many to monitor. The point is that you want me to go down the list of things that are wrong with Wall Street investments, with stocks and bonds?
Jason Hartman: Please do. Go ahead – yeah, absolutely. There’s a lot wrong with them. So I’d love to hear your thoughts on that. Go right ahead. Please.
Howard: Well, first, Wall Street has made lots of money for selling pieces of paper that supposedly to represent something tangible; supposedly.
Jason Hartman: Right.
Howard: They’re immensely money-motivated. I remember when I was at the peak of my notoriety in the late ’70’s, I got a call from Merrill Lynch, the Chairman of the Board said, “Come to New York,” and they’d pay my trip and they’d show me around. They were thinking about a mutual fund they thought I might like with precious metals. So I went there and they had a vice president, Jared taking me around. He took me into this huge room with all kinds of desks and everybody’s talking on the phone at their desks. And these were the brokers. Well, all they were talking about was the money they made in commissions.
So, the guy took me out to the garage and showed me all the Porches and Maseratis and Cadillacs and I was supposed to be impressed. Then he took me on the roof and showed me the yacht harbor in the Hudson River just loaded with yachts and told me how the brokers all owned these yachts. I was supposed to be impressed with that. I was not. I’ve never met such a greedy, money-motivated group of people in my life. And that very fact turned me off. So the point is the money in the future is going to be made by people who ignore Wall Street, who don’t pay any attention. Like I said the herds get turned into hamburger.
Jason Hartman: Howard, I’m surprised. I thought you were going to say, as the punch line to that story, you ask them, “Where are the customers’ yachts?”
Howard: Yeah, well that was – there was a book by that.
Jason Hartman: Yeah, right.
Howard: But those were all the brokers’ yachts.
Jason Hartman: Sure.
Howard: And a lot of these guys were making millions of dollars a year in commissions.
Jason Hartman: I know.
Howard: Now the gold and silver is not hard. It’s just unfamiliar to most people. It’s not hard to buy and I’m just dictating a chapter now for my new book, which describes the problems and how to avoid them. I’m not a gold bug. Gold bugs are always bullish on gold and silver. That’s not me.
Jason Hartman: Okay.
Howard: I just want to be right for the times.
Jason Hartman: Yeah. Fair enough. What do you think about the numismatic side of precious metals?
Howard: Well, yeah, and you’ve got to know a lot more about it than I want to know because there’s – you’ve introduced a couple other factors. One is the bullion content. Another is the scarcity and condition of the coin. And I don’t have the skill to judge that. So, you will make money in numismatic, but it requires skills that I don’t have. You will do well, but I kind of like the semi numismatic, which are, have some scarcity value and they’re value is pretty much based on their bullion value and a little bit for the scarcity value. I like those things because they’re specifically exempted from seizure if the government should decide to seize gold.
Jason Hartman: Assuming the law stays the same, though, too, right? I mean they can always change the law, right?
Howard: Yeah, but they have no reason to do that. Right now, the government thinks gold is something that they manufacture and sell coins. They’re trying to sell the stuff. They’re not going to buy it. And remember when Roosevelt did it, it was considered real money and he did it to improve the government’s balance sheet. So when he seized the gold, it wouldn’t improve the government’s balance sheet because it wasn’t even on the balance sheet. But just in case you’re worried about it, that’s one of the reasons why I would prefer silver. Because the silver market is so small, the government wouldn’t benefit by seizing the silver, or they would hardly benefit. The odds are the government won’t even pay any attention to the silver, and to them, it’s just an industrial metal.
And yet, throughout history it’s been a monetary metal. It’s been more useful for making into currency than gold has over the years. So I like it. And there are over 2,000 industrial uses of it, so it could do well in good times or bad. And incidentally, as I’ve been watching the gold and silver markets, which I do every day, they’ve been doing very, very well. For example, when the market collapsed back in 2008, and the stock market was down like 45, 55, 65 percent, gold was down only 7 percent for a little while. Silver took a beating and I begged my subscribers to jump in and buy some when gold was clear down from like 18 down to 9. I recommended that they buy it. Now, you’ll never find an opportunity like this. It’s back up now over $15, on its way back up.
Jason Hartman: Right.
Howard: The point is I’m not a trader. I don’t believe in trading anything because I’m no good at it. I always buy high and sell low when I trade, which I don’t recommend to subscribers. I don’t have the skills to do that. So I want to catch a trend early in the trend and buy it and hang on no matter what. Go through the ups and downs. That’s what we’ve got right now.
Jason Hartman: Do you think that one day in the future here, as inflation sets in and the dollar becomes progressively more and more worthless, do you think that we’ll actually be trading silver coins to buy things? Or do you think we’ll be trading our silver and gold for a new fiat currency? What are your thoughts about like the Amero? Is that a crazy conspiracy theory?
Howard: That’s beyond my – that’s above my pay grade. I’m sorry; I don’t know the answer to that question.
Jason Hartman: Yeah. All right.
Howard: I should. I don’t care. Right now, we’ll simply be on the right side of it if we own some. That’s all. I’m pretty sure of it.
Jason Hartman: Yeah, okay. All right. So when you talk about how inflation can make people rich, is that the way – being invested in the bullions and having gold and silver as it rises in value?
Howard: Well, that’s one way. There’s another thing that’s going to happen. As the price of oil goes back up over $100 a barrel and it will, all of a sudden we’ll find that stores are having trouble getting truckers to get to their back door and restock their shelves because they can’t afford the fuel. Consequently, I recommend to my subscribers that they, when they go to the store to buy any commodity, not just food, but diapers, soap, motor oil, whatever, that they don’t just buy one, don’t just buy one can of tuna, buy a case. Set it aside. And that way you’ll be buying it at today’s low prices and consuming it at tomorrow’s higher prices.
So that’s a way to get a return on investment while betting on inflation, on the right side of it. Also, as the price of fuel goes up, eventually, public pressure will lead to a release of the oil service companies to build more oil wells and service them offshore. So I like oil service companies. And I think they’re going to benefit from inflation also. The pressure is going to be to build and build to construct more nuclear plants. Right now, there are 35 under construction or on the drawing board. There’s going to be more. And even if they only build that 35, there’s still there’s only half enough uranium above ground to service their needs. So I like uranium stock. That’s another way to benefit from it, uranium mining companies. So I like that. I’m not down on the whole stock market – just the growth stocks, the DOW Jones. It’s not like I’m down on most of it. But there are places and industry groups that I like that could make a lot of sense.
Jason Hartman: Yeah, and I agree with you about those sectors being wise investments, given that situation. But there’s always the potential graft of the investment banks, the CEO’s, the Boards of Directors. They just skim the money off the top and the profit, so even if the sector does well, maybe the investors still don’t fare well, right?
Howard: Well, perhaps. But we don’t know all that will happen. We won’t even know it’s happening. Consequently, I would like to base my investment program on actually owning the bullion and a good selection of mining stocks; and mutual funds in investment mining stocks. I like those areas. And you will make a great deal of money. And some day, we don’t know whether we’ll have a new currency that’s backed by the commodities or whether we’ll someday be using our coins to buy stuff. I’ve no idea how it’s going to turn out. And somebody smarter than me might figure that out. In the long run, we’ll be glad we have it because whatever happens to it it will be useful and it’s the simplest to buy, the least factors to worry about, the least complication. And so, for example, there’s probably a coin dealer within a mile of your house.
Jason Hartman: One of the dealers you recommend actually is right here in Orange County.
Howard: Yeah. And they’re very inexpensive, but oh boy, be careful. Compare. Even if you buy from one of the companies I recommend, compare prices because prices can differ.
Jason Hartman: They differ wildly.
Howard: They do and from day to day. And even from hour to hour.
Jason Hartman: Yeah.
Howard: So always compare prices.
Jason Hartman: No question about it. And I’ve found that some of these that have their own radio shows and stuff, those guys are some of the most expensive of all. I’ve heard them on A.M. radio and called up and priced them against another dealer. And I couldn’t believe the price difference. It was just amazing how much more they charged. Do you think, Howard, there’s any risk of getting like a fake metal? That’s always concerned me. You know, you take delivery of some gold coins, or a one-ounce gold bar, or something. How do you know it’s real? Maybe it’s fake. It looks pretty, but does anybody test it or anything? Do any buyers do that?
Howard: That’s another reason I like silver, there’s not enough money in a given quantity of silver, a silver coin, or even a 100-ounce silver bar, to make it worthwhile to spend all the time and trouble coming up with counterfeit. There will be some counterfeiting in gold. There always is. And that’s one reason why I have recommended companies. I know they check them. I know they check everything they have to make sure it’s real. I trust them. I don’t always trust them to have the best prices at any given time. But I trust the integrity of their business.
Jason Hartman: Good. And what do you think about other commodities? You mentioned uranium and so forth. What do you think about soy beans and coffee and rice and all the other things out there?
Howard: The only way you can buy them is to buy a futures contract and have a truck dump a couple of tons of it on your front porch.
Jason Hartman: Yeah.
Howard: The average person can’t do that.
Jason Hartman: Right.
Howard: The reason I like gold and silver is it’s the one commodity that people can buy in concentrated, small amounts, take home, and conceal around their house. It’s actually superior to the other things. Yes, I think commodities are going to go up. But the average person doesn’t have – cannot invest in them short of having a warehouse.
Jason Hartman: With storage of these metals, do you think it’s wise to have it in your house? Or should it be in a safety deposit box? And I’ll tell you the reason I ask, is that my grandfather collected a lot of coins and so forth and he used to show them to some people and he suffered a home invasion robbery. They stole a lot. Fortunately, no one was hurt, but it wasn’t a pleasant experience to go through. Do you think it’s okay to keep it in a safety deposit box?
Howard: What are the alternatives? Safe deposit box, the government has the right to tell the banks to seize the safe deposit boxes. And there already are laws that prevent you from storing precious metals or currency or explosives in there.
Jason Hartman: Oh really? Oh, I didn’t know that.
Howard: Yeah, there are laws right now.
Jason Hartman: Wow.
Howard: And so, there’s nothing perfectly safe. I remember a company’s invention of Earl Snyder, I recommend. He had developed something called a “Midnight Gardner”, which was a big PVC tube that you could put your metals in and bury it in your backyard. Midnight Gardner. I thought that was cute.
Jason Hartman: Yeah. That’s a good name. That’s interesting.
Howard: Be sure you remember where you put it because I know of one family, when their mother died, grandmother died, they knew she buried something in the backyard, but didn’t know where it was. They had to dig up the whole backyard to find it.
Jason Hartman: Yeah.
Howard: There’s no sure, fool-proof answer.
Jason Hartman: Yeah. And maybe the point is diversify. Do different things. Do multiple things possibly.
Howard: Sure. Absolutely, that’s always safe. But don’t diversify like Wall Street does.
Jason Hartman: Yeah.
Howard: To diversify between this industry or that industry is simply putting everything in the same boat.
Jason Hartman: Yeah. I agree with you there. Just in kind of wrapping up, tell people about your website and your newsletter and the book and so forth. And any thoughts you have in closing.
Howard: My website is rufftimes.com. www.rufftimes.com. There, you’ll learn more about me than you ever wanted to know.
Jason Hartman: And I want to tell people that’s spelled R-U-F-F times.
Howard: R-U-F-F times. That is correct.
Jason Hartman: Okay.
Howard: There you can read about me and sign up for my newsletter, the “Ruff Times” if you wish. But there’s some benefits if you sign up for it. You get a free book, “How to Prosper in the Coming Bad Years in the 21st Century”. Then I’ll tell you how to rip me off if you want.
Jason Hartman: Okay, if you want to tell them, I’ll let you.
Howard: Sure. You decide after a couple of newsletter that you don’t want it and ask for your money back. And I’ll send it to you promptly and you will keep the book. How’s that?
Jason Hartman: Sounds like a great deal. Any thoughts in closing, Howard?
Howard: Well, just that we’re headed for troubles, political troubles that are scary. I’m more frightened for the future than I have been in all the years that I’ve been dealing with alarm. And so my concern is convincing all my children to do the right thing. I have a couple 2 or 3 very wealthy grandchildren. We have 14 children now. Nine with my wife, Flora, and 5 teenagers we adopted and 76 grandchildren. So, that’s my biggest concern.
And when I write – when I write the Ruff Times, when I write books, I’m writing for my children, my family really. I’m making sure that they know what Wall Street jargon is and people can understand what I’m saying and do what I suggest and really it’s an instruction manual on how to do it. My key point is I’ve been publishing now for 34 years. I’m one of the old guys. I’m not one of these slick guys with the hair slicked back that goes on television and tells you what to do – the guy who’s probably hardly old enough to get a drivers’ license it looks like. And so the upshot of it is if you want to hear from a savvy old guy who’s been there, done that, been right most of the time over the years, then the Ruff Times are where you want to go. And we’ve had over 600,000 subscribers over the years and then my book has been approximately over nine years the biggest selling financial book in history. Still is.
Jason Hartman: And that was the 1978 edition?
Howard: Yeah, that was from the 1978 edition. So when I realized that Yogi Bara was right, it’s déjà vu all over again, and we were doing the same things we did in the ’70’s that caused that inflation and made us so much money in gold and silver, rather than writing a new book, I just decided to revise the old one and update it.
Jason Hartman: Good stuff. Well, Howard Ruff, thank you so much for joining us today. We appreciate having you on the show and learning from your vast experience. It’s been very insightful.
Howard: Oh, happy to talk to you. Call me again any time you want.
Jason Hartman: Okay, thank you.
Announcer: Copyright, the Hartman Media Company. For publication rights and interviews please email media@JasonHartman.com. This show offers very general information concerning real estate for investment purposes. Opinions of guests are their own. Jason Hartman is acting as President of Platinum Properties Investor Network exclusively. Nothing contained herein should be considered personalized, personal, financial, investment, legal or tax advice. Every investor’s strategies and goals are unique. You should consult with a licensed real estate broker or agent or other licensed investment, tax and/or legal advisor before relying on any information contained herein. Information is not guaranteed. Please call 714-820-4200 and visit www.JasonHartman.com for additional disclaimers, disclosures and questions.
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Duration: 51 minutes