This is Jason Hartman with this week’s edition of The Speed of Money, as the Democrats meet in Denver to spend more of the money we don’t have and the Federal Reserve meets in Jackson Hole to create money that doesn’t exist out of thin air. We all know this leads to one thing: more and more inflation.
We know from last week that the prudent use of debt is what I call the ultimate inflation shield, but how do we acquire good debt assets and to what do we attach this good debt? Let’s review some of the investments that don’t work very well in acquiring good debt assets.
No. 1, stocks; stocks do not work very well because you cannot attach very good debt to stocks. For example, you can buy stocks on a 50 percent margin and the interest rate is rather high. The other problem with them is you can’t usually “rent them out” to produce enough income to pay for the cost of the debt.
How about bonds? Well, bonds are a debt and in an inflationary environment, being a lender is a bad deal, so we don’t want bonds. How about gold and precious metals? Well, the problem with gold, precious metals and various commodities is that, most of the time, you cannot finance them and you cannot rent them out.
So that only leaves one really good choice and that is prudent income properties. On a good income property, you can acquire excellent debt assets at very low interest rates and when it comes to housing, the government is basically subsidizing it through the government-sponsored entities, like Fannie Mae. We’ll talk about them on future shows.
Next week, let’s parse up this equation of income properties and talk about one of my favorite subjects, packaged commodities investing. Until then, visit www.jasonhartman.com for more information and thank you for joining me on The Speed of Money here on 790 KABC.
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Duration: 2 minutes