The 10 Commandments of Pandemic Investing

hey everybody it's Ken McElroy here and I'm here with my good friend Jason Hartman hey Jason hey Ken how you doing buddy I'm great great the zoom stuff huh what do you think yeah hey I think it's good it's a lot easier than getting on an airplane but I'd love to be hanging out with you in person again and we'll do that soon but I know I've spoken in a lot of your events I love what you do you know you're teaching people all over the world and you're masterminds and all the stuff you're doing online it's great what are you working on these days well you know I got a new presentation I've been giving a lot and it's been really well received it's called pandemic investing and you know Ken I started noticing about two two and a half months ago which in pandemic yours is like dog years right it's like you know two and a half months ago is three years ago nowadays everything's moving changing so fast it's just nuts what's going on in the world and you know really tragic for a lot of people I don't want to you know appear that I don't notice that but at the same time there are a lot of opportunities and you know that's what we're going to talk about today hopefully how to how people can react and respond to what's going on in the world and so I bet I've been making the rounds talking about pandemic investing in them anxious to talk to your audience about it too yeah I tell you it's been interesting as you know I've been home I haven't been investing and everything's kind of on hold of the you know the lenders pretty much you know shut their doors and even on the deals that they said they were gonna do you know they're kind of backing away from because they don't know the values are and so you know I've been doing these YouTube videos as we were talking about before the show and one of the biggest questions is you know what do we do now because they're super afraid of the stock market and you know and they something I don't know if you saw but savings the savings rates the highest spins since the 80s and and you know people are hunkering down with cash which I think it's good because there's a lot of uncertainty but the real question is is how do we invest during this pandemic yeah no question about it and Ken you've been doing some awesome YouTube videos man I I love your videos like you up your game during this it's I know that your game wasn't strong already it certainly was you know with all your books and stuff but but your your recent videos are just super good and a lot of my friends they send them to me and I'm like I already follow Ken's stuff you don't need to send me as videos they ask me about them and all that kind of stuff but so so they're great and you know I got a just talk with you about something before we kind of dive in and I'll share my screen and we'll look at some slides and charts and graphs and all that good stuff for for the analytical people but um you know one of the things I noticed and this was very early on is that in wuhan and in Italy we're really hit hard in Italy is that the common thread was that those people that were sadly really really hit hard by the pandemic we're living in high density environments you know I've been to China I've been to Italy several times and you know that's high density right and the type of investing style that you mostly do and I don't know your entire portfolio is this sort of suburban you know stick built like four four storey maximum but usually garden-style apartments right am i right about that yeah mostly two-story even single storey yeah yeah well you know more more neighborhoods yeah yeah so your stuff I think is gonna fare a lot better and when we dive into this talk today you know one of my big predictions two and a half months ago is that there is and now the media is caught on but you know two and a half months ago this was like big news right nobody was saying this at least not that I could see is that there is going to be this mass migration almost like if you remember the old book that I read and I think 10th grade by John Steinbeck Grapes of Wrath yeah it was you know this mass migration in America out of the Dust Bowl to the west coast right and now we're gonna have this mass migration Kenny from high density environments to low density environments and one of the interesting things about that is you look at like New York City sadly very tough in there and and tough time that they've been going through and you look around the world and the the hardest hit areas are these high-density areas where you can't socially distance and the two danger zones that are the biggest danger zones in the social distancing world in my opinion are elevators and mass transit elevators and mass transit also but you know even if you don't have an elevator in your building where you live and you don't take mass transit if you're in a high-density city and you go to the coffee shop the restaurant the grocery store anything it's just crowded the aisles are small it's hard to socially distance and one of the neat things about America as opposed to other countries is the idea of suburban living that is a uniquely American idea that really started in the post-world War two ERA with the baby boomers you know suburbia right America for better or worse is in love with the automobile you know we love our cars in the US right and so we don't have good mass transit here and that's terrible for the environment and it's inconvenient at times but when there's a pandemic it's really good okay because you know that that keeps us distance and safe so you know we can dive into some of those trends today and talk about it whenever you're ready well thanks you know it's perfect timing for that because you know I actually own property in Flagstaff and Sedona and some of these small little towns and you know we're blowing up I mean you know we have we have a number of people moving here from out of state to Arizona because they see Arizona as you know naturally socially distanced right and you know the you know you can go rent a house or a cabin up in Flagstaff and you know not have a neighbor for a mile if you want you know sure and and you know that's fine but nobody needs to go that far I know yeah they are yeah there's a there's survivalist are for sure no you can live in Phoenix okay in a two-story garden style apartment and be socially distance so we'll look at some stats in terms of mid rise and high-rise buildings where you really are required to take in all of the elevator okay right and those are almost always in cities where when you leave your building you can't socially distance and can I'll tell you something you are in the right spot being in the housing world and so is my company cuz for for 16 years we've been helping people buy single-family homes and other small apartments and low density properties all around the US and I tell you this is a good time for our type of product it is let's jump right in and let's teach some people on what we're doing and how we're doing it because I think you know this investment during this pandemic is a great topic and it's timely so I'll just go through this pandemic investing presentation and one thing I want to say at the beginning is look this is so new and things are changing so quickly that you know it's like you you put a chart on here and in a week it's out of date already so just understand that the the macro concepts are the same and those stand regardless you know there's a an ideology out there that in a recession or depression the person who wins is the person who loses the least okay and what we have to understand is investing and economics is a relative game and it may sound bad to say it but you know at any given time the economic pie is only so big and the point is to lose the lease even if you don't win and you don't gain at least maintain because in a world where others are sinking if you're treading water you're ahead relatively speaking ok so that's it the worst case but on the better side of it the Chinese have a symbol of many maybe many people of heard this for crisis and it's the same symbol for opportunity and literally translated this means crisis is an opportunity writing the dangerous wind crisis is an opportunity writing the dangerous wind so there's always opportunities and we're going to talk about some of those today the the advice I would give everybody is number one stay calm number two keep good counsel be around people that are giving good ideas good advice like Ken like his podcast his YouTube channel and hopefully the stuff I put out as well my podcast my YouTube stuff and keep your eye on the ball remember the word will wake up this will not last forever things will go back to not normal but we're going to talk about a new normal today okay and keep your eye on the ball you know what is the big picture you know try not to be so distracted with you know everything that's on the nightly news because that will just it'll just freak you out and it's not gonna be good for you keep your eye on the ball what's the big picture what's your big plan and then always ask what my listeners on my podcast have called the Jason Hartman question and the Jason Hartman question is compared to what compared to what everything in life is relative can you know a lot of the teaching that you do is on when you teach people how to analyze deals and look at numbers on an investment you talk about ratios and percentages and that's what's important because percentages and ratios tell you the relative thing they always answer the question compared to what so that's what we're going to talk about a little bit today and last number five take action you've got to take action if you are paralyzed you are going to lose okay you've got to act on things and the people you know back I mean look at been in the real estate business for 35 years okay along I think got my license my first year in college when I was 19 years old and you know one of the things I'll tell you is that having been through a lot of recessions it always feels devastating when you're in it okay and we're probably in a depression now this might be the worst one that I've ever seen certainly could be worse than the 2008 crisis okay the Great Recession which was the worst stuff until then but no matter what the people who always win are the people that during the darkest hour the darkest time they do stuff they make stuff happen they take action they are not paralyzed by fear and you know we have clients who are buying up properties in 2008 2009 2010 and look at where they're sitting now they're they they killed it I mean they killed it okay so so good for them you gotta take action okay um I learned from some of the best thought leaders I don't claim to know all the answers but I've done over 6,000 podcast episodes now and look at right here we got Ken McElroy okay and a whole bunch of others and I interview these people all day long on my show and when I interview them I learn a ton of stuff because I'm constantly interviewing these people Yogi Berra the famous baseball legend he had a great saying you know he had all these great sayings but one was the future ain't what it used to be and that typifies what we're going into now we are going to wake up after this into a very different world a new normal can I know you were talking about on one of your youtube videos the other day about how you went to a restaurant in Scottsdale and you know the owner of this restaurant and you know it's just a new normal you know going out to dinner ain't what it used to be this restaurant you were talking about how it's always packed and this time you know its operating in a small percentage of its old capacity so things are gonna be very very different okay um you know back in the 80s 90s I got really fascinated with a group of thinkers called futurist okay and the first one was a guy named John Nesbitt and he published a series of books called megatrends and in his megatrends books he talked Ken about all of these different trends that were gonna shape our lives and he was right about a lot of this stuff it's amazing but one of the things he talked about which was really interesting is how he moved out of the big city and moved his office to Telluride Colorado which he called a quality of life lifestyle location right Telluride Colorado is not Los Angeles it's not San Francisco it's not Chicago and it's certainly not New York City okay it's a quality of life place and the big technology can that he said enabled him to live and Telluride Colorado get this you ready for this one the big technic technology breakthrough that enabled him to live remotely and work remotely like that was Federal Express that was the big technology of the day that enabled him to work remotely okay and then there was another futurist I I really followed a lot and her name was faith popcorn and faith popcorn published a book called the popcorn report and in the popcorn report she talked about the concept of cocooning cocooning okay and the idea behind cocooning is really what i'm saying today that the home is the center of the universe the home where people live is the center of the universe and we've all seen how retail properties have been devastated the past you know 10 15 years by the internet and what they call the retail apocalypse and we've now seen that office properties are just getting devastated and Twitter and Facebook and so many other companies have told huge shares of their we force that they can work at home indefinitely forever and that lessens the demand for office space we've had the trend I started talking about in 2003 to my audience seventeen years ago I was talking about how you know they were offshoring the the manufacturing to China and offshoring the office workers to the Philippines in India you know if you call tech support or a call center they were usually in the Philippines or in India right or maybe in Central America and that lessens the demand for office space so faith popcorn back to her her big technology that was the idea behind cocooning okay where people would stay home more and more not go out as much in the 90s guess what that technology was home theater systems yeah big-screen TVs and home theater sound systems that could really make it very pleasant for people to stay home instead of going to a Broadway play or the movie theater right they could see you know back before that you didn't have these big screen TVs or at least they weren't affordable and you didn't have these great home theater sound systems so home theater and cocooning right now there was another great book that I read in the 90s by Alvin Toffler and this is called power shift and Alvin Toffler futurist he talked about the three forms of power from the beginning of time okay the first form was the ability to inflict violence I know it sounds terrible right but you could control the environment and you could control other people if you were a warlord and a bully and you could inflict pain on people right and that was a terrible form of power but it was certainly true throughout history then the next form higher grade form of power was the ability to control capital and we certainly saw this mostly in the industrial revolution with the Rockefellers and the melons and the Carnegie's and you know all of these industrialists right capital controlled the world and then the third form of power which is the highest grade form of power was information and we are still living in the early era of the information society it's still early even though it's been going on for decades but the information world will change everything forever it already has changed everything forever but this will continue to march forward even more and these information tools like the one we're using right now soon hmm has enabled people to be remote and what this all adds up to is a new world a new world that we're waking up to which by the way another book the fourth turning maybe you're familiar with that one where they talk about how the world is changing in 2020 and 2030 decades are gonna be huge changes for the world okay so like Bob Dylan said years ago in the song times they are a-changin okay and I think we can all agree on that many things happening one is called supply demand shock and that's an economic phenomenon that hasn't happened really since the 70s but it's happening again now and what this means is that initially when things get bad in a recession usually it's because demand falls off and like you said earlier Ken consumers are saving money and you know this is ultimately a good thing right but it slows the economy down because nobody's spending and 70% of the economy in the US is based on consumer spending okay so it's huge when demand falls off when people get scared and they stop buying things and they're staying home and they're not spending demand collapses and that puts us into a recession but the flip side of it and this is the weird part in this era is that also supply has declined and so there was a housing shortage going into this and now that the home is becoming the center of the universe and people are much more to their housing than they ever have been in human history possibly because they can work remotely they can workout remotely and they want a socially distance end there will be a post-traumatic stress disorder coming out of this a PTSD phenomenon where people want to live in a larger home a more suburban style of living non high-rise or they can socially distance so an example of supply-demand shock I'll just give you a quick one in the 70s it was mostly in the oil market and you know people might know about the gas lines I mean I remember when I was a little kid we waited in line for three hours just to get a tank of gas okay it was crazy what was going on that was an example of supply demand shock and it's a miserable economic malady and so in the airline's when the pandemic broke out if you look at I just did this myself going to Google flights and I charted a flight from Miami to Los Angeles okay and you you see that the pricing was normal before the pandemic okay and you know it cost you maybe 300 325 bucks to buy that ticket right but then as the demand collapsed the tickets got really cheap and you could buy a ticket from Miami to LAX for less than $100 but then what happened is the airline started canceling routes and grounding flights and we've all seen the pictures probably of all of these jumbo jets these huge you know hundred million dollar-plus airplanes sitting in parking lots in storage or where airline airports have closed multiple runways just so they could use those runways as a parking lot for jets where they're just all stacked up on the runway and they're not flying so now the price for that same ticket went way up it went to 437 dollars is the high this is supply demand shark and this is going to happen in housing this will happen in the housing market now look um can I saw your video about and it was a great video by the way where you had all the circles you know the one I'm talking about on your yeah yeah yeah and and you talked about how we were going to go into this recession slash depression I don't know if you called it depression but it may well be one and there gonna be lots of foreclosures there's gonna be a lot of bankruptcies we're already seeing just the tip of the iceberg on that I think it's gonna get a lot worse so I do not deny for a moment that the economy is going to be very hard hit it already has been and you you did this other great video can where you talked about you know how the normal unemployment rate you know is maybe four percent or so right and you know now it's skyrocketed and we don't have to get everybody back to work but the Delta between the normal unemployment and what it is now we got to get those people back to work and how long will that take and the reality is a lot of those jobs they ain't coming back if you ask me they're going yeah they're gone and so we are going to wake up to a very different world okay and you know we don't have time to talk about it today but trickle-up economics is the opposite of trickle-down economics where every contract in the world is now being renegotiated we saw this during the Great Recession it's like a game of hot potato you know the the renter says well I can't pay my rent and then the landlord says okay well I can't evict you right now and by the way that that's changing but you know and and rents are largely being collected thankfully you know the rent stats aren't as bad as we all thought they might be now granted wrong a couple months in but but it's it's looking like that's not such a bad problem okay but you know many of those landlords or just homeowners go to their lender and say hey I can't pay the mortgage give me a forbearance a loan modification a workout or a short sale or I'm just gonna let the property go like they did during the Great Recession we're still early so we don't know how this gonna turn out and then that lender passes that burden on to its mortgage-backed securities holders right and and then they pass on that burden because they lost their return on investment to somebody else so it's this game of hot potato where everybody passes everything down the line trickle-up economics okay I believe we are going to see a massive expansion of section 8 the housing at rental assistance program or an entirely new program and I don't even know what it will be but you know we are moving into an era where the government is going to be much more involved in the economy much more involved in our lives for better or worse you know call it socialism you know it's here folks ok you know that the idea that I would love to see as a more libertarian world I'm dreamin it's not gonna happen ok we're going the other direction no matter democrat-republican it doesn't matter also the rich are going to get richer they're already getting richer because the rich have capital during tough times when other people don't have capital so they can seize opportunities what opportunities are there and in Cannon in one of your recent videos you talk about that great thing on universal basic income even my most libertarian friends and I had the presidential candidate Andrew yang on my podcast talking about this on you know ubi or universal basic income it was already coming before the pandemic and that was largely due to technology just destroying jobs The Economist one of my favorite economist Joseph Schumpeter coined this phrase called creative destruction many years ago and he talked about how free markets and capitalism creatively destroyed businesses to create better new businesses and this is a good thing although it's painful at the time you know there's a lot of bankruptcies a lot of hardship but we come back better and in that process technology is was already taking away a lot of jobs just think on all the trucks and all the delivery cars are self-driving and your your internet shopping deliveries are delivered by drones okay that is going to destroy a massive amount of jobs and those jobs will never come back okay so technology is a creative destruction force and a pandemic and social distancing is even more destructive to that so I think we're gonna see a universal Vegas basic income it's coming there's another thought that's really popular with the millennial generation and that's called mmt or modern monetary theory I think it's largely a fantasy but we're gonna have it because we're already moving toward it okay and I won't go into what it is today but it's it's just gonna be more of a thing we're also gonna see a push toward a cryptocurrency that is not necessarily Bitcoin or any of the others but it's a digital dollar the cryptocurrency that's gonna win the game is going to be the one sponsored by the government and the Federal Reserve that's the one that's going to win okay and I'd love to be wrong about that I'd love to see Bitcoin win the game I just think the forces against Bitcoin are far too powerful governments and central banks and the dollar is going to be the thing no matter what anybody says about you know can we've all heard it you know the dollars not bad by anything well I have news for you the dollar is backed by aircraft carriers and nuclear missiles okay that's what the dollar is backed by a standing army that is bigger than anything and more powerful than anything the human race has ever known so if you think the dollar is not backed by anything you're absolutely out of your mind okay sorry about that folks but the dollar is very well backed and you know it's a game of comparison you know when you say oh the dollar you know the government's spending so much money yes that's all true I agree I agree and and you know these deficits and the national blah blah blah I've heard all the arguments I've made a lot of those arguments myself and you're right it's true but the question is compared to what compared to Japan that has a 230 percent debt to GDP ratio the u.s. has very little debt compared to Japan okay the third largest economy in the world the u.s. is in a very very good position in the global on the global stage and the dollars the reserve currency of the world and that isn't going to change anytime soon okay regardless of its detractors so PTSD we talked about that how we're gonna wake up into PTSD it's really a tale when it comes to real estate it's a tale of three markets it's not about the real there is no national real estate market okay and can you teach that you know that all too well your your followers know that but when people listen to the mainstream media when they look at the Talking Heads on CNBC or they read a news story and someone's talking about the housing market you know I don't know what that is I don't know what you mean by that right yeah are you talking about Los Angeles Miami Chicago Memphis Little Rock you know Jacksonville Florida Indianapolis where's the housing market in a country as large and diverse as the United States you have about 400 local markets and they can be divided into three categories linear markets cyclical markets and hybrid markets okay and with those linear cyclical and hybrid markets they act very differently okay the markets that will suffer most through this time will be the cyclical markets and the hybrid markets let me explain the difference okay linear markets are boring markets that don't get much attention in the news media there are the markets in the flyover States as Hillary Clinton kindly put it okay there are the markets in the Midwest the southeast these are markets that are not expensive markets that have good cash flow and markets where investors can buy properties that make sense from day one okay the properties are cheap you can buy you know one hundred and thirty thousand dollars single-family homes that rent for somewhere in the neighborhood of twelve thirteen hundred dollars a month that's a great investment okay and those markets will not suffer very much if at all through this then there's the hybrid markets in between linear and cyclical these are places like Austin Denver okay these are nice places I like these cities a lot but they've gotten a little bit expensive they're not terrible they're not way out of bounds by any means they're okay but not as solid and safe as the linear markets then there are the crazy cyclical markets the ones that get all the news media attention this is the west coast of the US it's the expense of northeastern markets and it's South Florida where I live okay so you know if you're talking about LA San Diego San Francisco Seattle Miami New York Washington DC Boston Massachusetts those types of places these are very expensive markets and if you're looking at a chart okay they look like a roller coaster because the prices have glorious highs and they have really ugly lows and these are markets that are mostly because the real estate is so expensive they're mostly high-density and there is going to be a mass migration from high density to low density as the world wakes up and we're already seeing it we're already seeing this and the lockdowns haven't even lifted yet okay so invest in linear and hybrid markets avoid cyclical markets okay the home is the center of the universe we talked about this already but people in the business of selling things for the home are gonna do pretty well okay right when the pandemic broke out and all the gyms closed all the home gym and workout equipment was just sold out everyplace peloton stock went way up okay and there they were doing great okay so people are work out at home they're working at home you sell home office stuff you're in a good position if you sell home gym equipment you're in a good position if you sell furniture that's pretty good okay um I mean I'm not saying it's perfect I'm just saying it's better than other things because the home is the center of the universe okay and the size of the home people are going to try to increase it they're gonna try to move to lower-cost markets where they can get more house for the money and be in a low-density area and that is suburbia suburbia a uniquely American idea okay when you look around the world and I've been to 87 countries now when you look around the world mostly around the world you have this scenario you have cities and you have the country you have urban and rural but in America you have this middle idea you have cities you have suburbia and then you have rural you have three choices in the u.s. mostly around the world do you have two choices I'm not saying that's entirely true it's not a you know it's a general statement understand I know there are suburbs and other countries I get it but suburbia is really an American thing and so it gives us a lot of choices for investing because there's a lot of suburbs here okay now the other thing is I think there's a real mind shift to Ken I think people are gravitating toward a much similar life okay I think people during this pandemic time have reassessed their priorities and I think they are prioritizing simpler more important more basic things and we'll see if that's true as we come out of this but I think I think that a simpler style of living is going to be the thing going forward I also think we're going to see stagflation stagflation is kind of a crappy thing okay it's it's not fun the last time we had real stagflation was in the 70s under Jimmy Carter and they the term the misery index became very popular back then because it was miserable it's an environment where you have high unemployment and at the same time you have high inflation and grocery prices for example just reached a 50-year high so grocery prices now a five decade high relative to incomes okay so stagflation not fun but regardless okay there are opportunities through all of this more socialism no question about it we are moving into a bigger government world or the government plays bigger role in our lives and it's going to be a more socialist type environment and a more George Orwell Orwellian 1984 environment where you know we're being traced on our phones they're doing already what they call contact tracing to find out who were hanging out with and who's infected and who's not and all of this is going to be just more intrusive okay now a big idea for a general portfolio strategy 70% of someone's money this is my recommendation in growing and flowing investments and that's the type of real estate that Ken and I both like okay ten percent in speculative investments ten percent in hedging investments insurance that's where you might buy some gold some Bitcoin okay I'm not a huge fan of those things but you know they're insurance I get it and then cash reserves you know Ray Dalio very wealthy guy certainly respect him but you know right at the beginning of this he was out and making the rounds in the news media saying cash is trash well I hate to say it Ray was very wrong about that cash is not trash right now cash right now is pretty valuable okay but ultimately he's right because as inflation comes cash becomes less valuable okay so we don't want that much in cash long term but right at the moment cash is good okay I talked a lot about this on my podcast you know I know I have to go a little fast now for what we're talking about be you can check out my podcast on iTunes or whatever so the charts look awful okay I mean you know I don't have to go through these in any detail we all know about this industrial production has plunged at the steepest rate in seven decades unemployment through the roof what's interesting to look at though is not just unemployment on that chart but looking at this one that shows these sectors or the types of jobs that have the biggest unemployment rate and so the service occupations even construction and extraction like mining although you know a lot of that is not as bad as it looks and it's come coming back okay because there's definitely a demand for housing we've already seen that housing you know I know it was kind of shut down for a while but it is coming back with a roar already and we've just seen a lot of articles about that in the past week again things changing so fast you know it's all subject to change quickly okay and and so you know you just look at this and you know some of these jobs are just only gonna come back to a small degree of where they were housing starts had a huge drop but the demand is still there the population is you know it's still growing overall so we need housing definitely need housing now can you did a video where you talked about the shape of the recovery and I love that video by the way it was really good okay and you talked about the V shape the U shape and and and then there's like an L shape or a Nike swoosh so you talked about this remember that video you just did yeah really good stuff so my opinion of the shape of this is sort of a new one I think it is going to be a modified square root sign and here's what I mean about that you've all seen the square root sign maybe you don't remember it but it's on the screen if you're if you're watching if maybe you're just listening to audio only so that square root sign where it goes along then it goes down and it goes up even higher okay but I think we're coming into this version of the square root sign I think we are coming into a smaller economy where there will be less economic activity and lower GDP and a smaller economy now initially you might think I'm wrong about this because there has been some pent up demand with lockdowns and so you know everybody in the world is starting to go out and get a haircut for example right I just got one Wow that was nice and my dog just got a bath she hadn't had a bath for a couple of months longest ever right and so now she's not stinky anymore so initially you see this pent up demand but ultimately we're gonna move into a smaller economy a simpler life I remember that TV show The Waltons from when I was a kid I used to watch the reruns of The Waltons a Great Depression era show and here's kind of a funny more modern version Paris Hilton remember that reality show she'd of the simple life so we're gonna move into a smaller economy remember our economy is 70% consumer spending when consumers don't spend the economy has to shrink okay that's the 70% rule I won't go into all these charts and stuff but what I do want to talk to you about is these opposing forces okay so opposing forces deflation and the inflation right and that war between these opposing forces has been on the deflationary side technology and globalization on the inflationary side bad fiscal policy meaning the government spends too much money and bad monetary policy meaning the Federal Reserve prints too much money that's inflationary who will win the inflation deflation outcome will be technology and globalization causing deflation or bad fiscal and monetary policy causing inflation I mean we have created so much money trillions of dollars in such a short time it is truly just staggering no one can believe it right with what's happening so who will win we don't know yet outcome to be determined but in terms of your investment portfolio and and what you do anybody listening to this of course on one side we have recession or depression okay right things are bad no one would deny that versus migration and this migration to lower density lower cost of living environments so when you listen to the Talking Heads talking about while the real estate market is going to suffer what market is going to suffer I say the markets that will suffer are the cyclical expensive markets where people live in high-density environments but as people flee those markets and they're already doing it but it's gonna be a tidal wave we are going to see a lot more price increases upward price pressure on both rents and sales prices in these smaller suburban markets these second and third tier cities and this is the stuff we've been helping our investors buy for 16 years now in places like Indianapolis Atlanta Charlotte Ocala Florida Jacksonville Florida you know Dallas Houston San Antonio all these types of markets we used to do Phoenix where you live Kenan Scottsdale well not Scottsdale but Phoenix and it just got too expensive and became more of a hybrid market but these these basic markets are going to attract a lot of money this money is like a tidal wave coming at this okay so let me just see here oh here's one point so the only way of real estate was always location location location that's been the rule of real estate since the beginning of time if you were a caveman location mattered was your cave safe from predators was it close to food and water location mattered if you wanted a job in the industrial era you needed to be near the factories if you wanted a job in the Information Age you needed to be near a city or in a city where you can high income opportunities now the whole world has woken up and realized that so many of us can work remotely even though we knew it before the technology is not new we've been you know for twenty years we could do WebEx and and and Skype and all this kind of stuff and we you know it was possible but nobody did it now everybody cuz necessity is the mother of invention okay everybody's been forced to do it so now the mentality is completely shifted Ken back in 2012 on my podcast I was saying this location is less meaningful than it's ever been before location is less meaningful than it's ever been in human history and the reason I was saying that 8 years ago was because of the self-driving car coming in and how that has changed everything now it's not quite here yet but it's not far away either ok and now with a pandemic it has only accelerated this idea that location is less meaningful and it's ever been in human history I talked about this on RT recently on an interview with Rick Sanchez and how this mass migration trend is developing and can I've identified six trends that contribute to this tidal wave but I've been talking a lot and we've also spent some time here so I I don't know how much we have time to go into I've already touched on a few of them so you let me know do you have questions thoughts or but first of all thank you this has been great it always is and when I go to your stop and listen to your stuff Jason I always learn some great great things this is exactly what a lot of questions I'm getting I would love to talk about the sixth the pent-up shadow demand the things that you see because you know that's what people are asking you you know and I'm a massive as you know so is Robert Kiyosaki a trend investor you know where you got to follow the trends you know in that video I did I have talking about Buckminster Fuller I said you know don't fight the forces use them you know and the forces are in it you know in his world he's a futurist - he was an early futurist yeah Bucky fuller was great and I know you and Robert talk about his work quite a bit you know he invented the geodesic dome and that guy was way ahead of this time I mean heart he's hard to understand like you gotta have some intelligence to grass I can't I can barely read his stuff I sometimes have to read a sentence like multi times I know me too he's so smart but you know he was a trend guy you know and and you know and and that's why I loved how you started this with that so let's let's finish up on these you know pent up shadow demand trends because I think that's what people want to know is what do I do yeah yeah yeah what you do and I'll just tell you now basically what you do but there's more to it than this is invest in these properties that this tidal wave of demand is coming at there is a tidal wave of a tsunami of demand coming at properties in lower density environments lower cost of living environments the simple life PTSD all this stuff I mean look at we're gonna have a vaccine we're gonna have better treatments we're gonna have protocols we're gonna have contact tracing for better worse you know Big Brother is going to be watching us sadly but you know the pandemics not gonna be with us forever this is gonna blow over okay and maybe it'll just naturally disappear because some of these do you know they just kind of summer comes and they just kind of naturally fade away right but the the thought the memory is going to be with us for a generation this is like people who are having like my neighbors just had a baby okay and I think you know 25 years from now those parents my neighbors are going to be talking to their their new son about this time this is like a big deal in history right now folks you are living through history okay I mean we always will live through history but this is this is a major occurrence this is not a small thing what's going on right now so one one of the six roommates so Ken it's hard to get stats on roommates that's the first thing I want to say so some of this stuff I'm gonna talk about is like back of a napkin math and literally one of the graphics I'm gonna show you is a napkin okay we're gonna do some back of a napkin math here so so don't hold me to like the exact things the idea is to identify the macro trend okay you don't need to know the exact numbers okay you just need to know the macro trend and you need to position yourself out in front of it so you can surf that wave okay and that's what we're gonna help you do okay and and you know we've got more we've got a whole webinar we've got a whole course on this stuff and you know can-can will tell you about that later us win another one of his shows too but but roommates okay so a as of eight years ago 32 percent of the adult population the United States was doubled up with room as roommates and non romantic relationships okay so think about this conversation that has probably happened in millions of roommate households here it goes it goes like this one roommate says to the other hey you know now that I'm working out of a house you know I really need that second bedroom as a home office and you know my employer told me that they're even gonna give me an extra $300 a month and they're gonna let their office space go because you know they've told you know pretty much the entire team they can work out of the house okay so that's what one guy says and then the other roommate says and I'm doing my role play here I'm really bad at this by the way the other roommate says hey you know what I was thinking the same thing I need that second bedroom so I can have a home office and you know by the way it also sucks because you know we used to never see each other we've just both come home to sleep before and and now you know we're not and the gym is closed and we don't have any place to work out and you know we're tripping over each other and I can't talk on the phone when you're talking on the phone and it's too distracting so I need that second bedroom so one of us has to move out so now they split up and guess what they just you just doubled the man for housing double that's a big deal double okay double is a big deal that doubles the demand for housing so the whole needs to get larger so if someone was living in a one-bedroom apartment or two people were living in a two-bedroom apartment they got a split and now and now maybe you know a lot of people are saying well well Jason you know they can't afford that because times are tough well some people can ok information workers are sailing through this pretty well okay but regardless what I'm saying is that the likelihood is going to be they're going to move to a lower cost City they're gonna move to a less expensive area I got a friend a young guy he lives in he went to ASU and he lives in New York City okay he's in the Wall Street world you know he works in finance okay and he actually technically lives in New Jersey okay but he works in New York City and he pays I think four thousand dollars a month for a six hundred and fifty square foot apartment okay and he's been working at home for a couple of months now right do you think that's very pleasant and and and suddenly both he and his employer realize he doesn't need to come in he's been doing his job at home so now the likelihood is that kind of person is gonna go find a two-bedroom place or maybe even a three-bedroom place in a more suburban much less expensive environment and you know what they're gonna pay for that they're gonna pay like fifteen or eighteen hundred dollars a month okay and they can still do all the same work because they're working on zoom' anyway and guess what guess how much money they have left over now you you think the economy is terrible and this is all bad news there's a lot of disposable income that's gonna become available if his income stays the same or even if it declines okay and his rent went from four thousand to 1800 that's that's a lot of extra money that's $2,200 extra every month to spend on something else to maybe start a business with maybe buy some more properties with okay so roommates one big trend okay now the other one and it's kind of funny the coronavirus baby boom hey people been locked up and you know if they're not arguing and fighting they might be making love okay a lot of people have said that you know maybe nine months from now there will be a baby boom and you know we don't know okay but we'll see the other side of that this has already been proven because it's already happened in China a divorce boom okay people crammed up together they can't stand each other they're getting on each other's nerves some couples splitting up okay and and look at this on the screen China's divorce spike is a warning to the rest of the lockdown world filing started rising in March as couples emerged from quarantine okay it will coronavirus intimacy lead to a baby boom or a divorce tsunami all right and then look at this one divorce cases rise in China as couples spend too much time together during coronavirus home quarantine folks this is real if people split you've literally doubled the demand for housing that's double roommates split double they need two houses instead of one couples split two houses instead of one couples have babies they need at least one extra bedroom now okay so there's a lot of changes and this is a funny thing from Gilligan's Island I don't know if you remember that show a couple of weeks in my isolation with your family what could go wrong now this is the back of a napkin math okay this is the 84% can you know 84% of the US population lives in what is defined as urban areas and at the bottom of the screen here let me just share with you some numbers on this okay the average population density in the u.s. is very low it's only 87 people per square mile like it's super low okay when you look at it 87 people per square mile the average population density in these metropolitan areas is 283 people per square mile but the average population density in New York City is 27,000 people per square mile so just look at that I mean and look at the the impact that has on one's life and their ability is socially distances absolutely insane so you take 84% of the population and maybe a small percentage of those wants to move from high to low density environments from this high-rise pictured here to the suburban community and this is huge this is the number of completed apartment buildings and based on the type low-rise mid rise or high-rise let me define those low-rise is four stories of hunger mid rise is five storeys and above and five to twelve stories and high-rise is twelve stories and above okay so let's take a look at this now these are the types of suburban areas that we specialize in this is just a screenshot from my website jason hartman.com and it just shows you know these these suburban markets and there are many other is this just an example but look at the number of households in the US okay from 1960 to 2019 we are now at a hundred and twenty eight point five million households just to give people a reference point okay here's the napkin let's do the napkin math you ready so we got 268 or 268 million people living in urban environments that's the 84% okay and how many of these cannot socially distance well we don't know because the definition of urban is pretty broad so we don't know it's not all New York City some of it is some of its downtown LA downtown San Diego downtown Seattle whatever Chicago Miami you know a lot of that is high density but some of it isn't so let's just assume that only 15% want to move okay that's 40 million people and if it's 2 people per household because remember urban people are usually don't have kids okay most urban people are no kids when you look at the division of these and this is just rental units this does not include condos its rentals only okay and these statistics by the way were hard to come by I got some of this stuff from rent cafe and I actually had to call them and ask for a special project to get some of this info because dividing it is pretty hard but you've got almost a million high-rise rental units that's 12 stories and over okay and mid-rise five stories and over you've got about 1.3 million for a total of about 2.3 million units okay now those are people that have to take an elevator now I didn't look at four stories where people will probably take an elevator or three stories they'll probably take an elevator too but you know I just looked at the definite you need an elevator okay which is five stories in a bus okay so that's 2.3 million units if 15% of those people a pretty small number want to move and these are just rentals not including condos that's three hundred and forty thousand people into or sorry that's a number of units three hundred and forty thousand units not people units okay spread that around 50 markets metropolitan statistical areas that are low-density that would be the fit for them and that means you need about seven and units in each of these markets that already have a massive housing shortage okay so this is this is pretty big this is a tidal wave it's a tsunami okay oh and this is from yardie okay carl icahn talking about it's the big corporate raider talking about shorting commercial real estate okay and he's talking about retail and office space mostly industrial and apartments that's different I wouldn't worry as much about those but retail in office definitely but look at this this is right this is March 26 okay from The Wall Street Journal when the pandemic really got underway and the lockdowns got underway the quarantine is got underway this is Google search data for the phrase work from home okay and look at how this shot up I mean that's a that's not even a hockey stick chart that's just a straight up okay it's crazy so the remote work experiment will cause companies and workers to reconsider their location okay and this is from apartment lists calm I interviewed them on my show over the last decade many companies new and old have invested in proximity paying sky-high commercial real estate rents in knowledge hubs such as San Francisco Seattle in New York City in response to kovat 19 however many of these companies are now having all their employees work from home in an unprecedented remote work experiment okay I don't need to read what's on the screen anymore but you get the idea this is a giant trend I mean this is a tsunami folks for a real estate demand in the right place look at this demand for office space and how its deteriorated and it's gonna deteriorate a lot more we've only seen the beginning of that here's the remote workers okay look at the roommates two people comfortable in a two-bedroom home families for people comfortable in a 3-bedroom home right you got a couple in one bedroom and two kids in each of the two other rooms well guess what the kids are now studying at home no matter what age they are right they need space to study and work and so do the parents so the size of the house needs to get a little bigger okay and these people will be buying these properties in lower priced environments smaller part of the trend but no less a trend shadow demand remote it's not just remote work its remote working out because the gyms are closing okay and people need that garage or that spare bedroom for a home gym okay and you know multi-generational living that's the last part of this trend we've all seen this terrible terrible stories coming out of assisted living homes and nursing homes and there are 28 million people in the u.s. who are older than 70 years for decades we've been talking about this trend called the graying of America the graying of America and by the way I'm getting some of that gray myself and I think it looks pretty good actually so I like it you know it's the bald part I don't like so much but the gray is fine and but twenty eight million people over 70 in the graying of America right and look at this they're talking to their relatives that they can't even go in the home and see them face time you know conventional assisted living homes are death camps due today due to the Wuhan Batsuit foot you probably know that guy's politics but but you know signs on the doors of assisted living homes no visitors okay this is huge I think mom and dad are going to or you know at least mom cuz women live longer are going to be living with their families this is this is how it works all over the world except in the u.s. you know in Latin America Asia Middle East multi-generational living as normal only in America is it not because we're so prosperous right so you're gonna start to see more space needed for mother-in-law's quarters you know or maybe in an apartment building like a low density garden style apartment building like some of your portfolio Ken you're gonna see an additional unit rented so that elderly can live near their kids right and they call this the Sandwich Generation this is just about retail spending and you know more of the more of the charts and and you know but this one's interesting remote work favors higher paid employees so this the economic devastation is very uneven in the way it's hitting people okay and these higher paid people are going to move out of these high-density areas into lower density areas where they feel safe and consoling distance okay air B&B that's been a catastrophe I mean the air B&B market has just been devastated the one caveat I have on that though that I think is gonna be okay is air B&B or short term rental properties where people can drive not fly to get away and have a uniquely different experience than where they live I think those actually will do okay for example there is a huge I interviewed Dottie Herman on my podcast and she is the CEO of Douglas Elliman real estate a hugely successful New York real estate company and I couldn't believe Ken how candid she was talking about how people are just fleeing the city and they're going to the Hamptons and they're going to outlying areas and so this is gonna happen everywhere it's not just New York you know it's just the biggest example we have but it's happening all around the country all around the world okay so I can show you charts tall and blue in the face but hey there's a lot more so you know Ken you and I are gonna offer the course on this and I'm excited about that right now people can just go to pandemic investing calm and and grab some more information about this a free video e an audio download if they want it I tried to take you know eight hours of content and share it all here so I hope I didn't overwhelm people - I love it I love it a lot of these trends that you're talking about you know also happen in o8 you know and and so you know we were trying to do is just make sure that you know we were Burt we were working with people if they lost their jobs that you know let's figure let's figure this out and and so we've had a really really really soft landing we've are we had ninety three rentals last week virtually so we're doing virtual rent virtual it's crazy like you know we installed chat BOTS on all our projects in March you know within the two weeks so we can accommodate people and then of course we're on the front line so we have a lot of we haven't we have to figure out the ground PPP our PPE out there yeah you know we have a lot of residents that have kovat so yeah so you know we're dealing with all these things but even through all that you know we've had tremendous growth I was not really impacted like we thought it was going to be and that's largely because Jason as you know you can buy a piece of real estate but if you don't put somebody in there that can pay it you know then you know yeah you're gonna have a cash flow issue so so the screening of the folks that are in our properties it's showing up right now yeah and April we collected 99% of what we thought were gonna be and as of earlier this week we're at 98% from man yeah I mean you know and you know what's interesting about that can well two things number one I want to talk about that technology in a moment the virtual tours because that's gonna be with you that's going to benefit you for yours to come and now everybody's accepted it your your your operations going to get less expensive to run and there's gonna be less friction for people to find a new house like the house-hunting problem is becoming easier now this is great like you know yeah operating expenses you're gonna go down I know so that's gonna be good for a real estate investors that's gonna be really good and you know it's gonna be good for tenants too because it's gonna be easier for them to do their home search because everybody's adopted these virtual showings and even if they're not virtual a lot more of our property managers in our network and our investors are doing like you know self what do I want to call it but you know self locked boxes right where the people can just get an app on their phone and they can access the house go look at it themselves no contact and and you know and you can do that now with technology the security is not a problem you know like it used to be well it's you know people do that now with normal things you know they sit and they you know Amazon boxes show up every day your house and so that that people are very used to being able to do things like that I actually I bought a car during this pandemic and never drove it it's in Minnesota and got shipped out yesterday you know there was only three of like I'm in a country and I wanted one and and so I cut the deal online I actually never spoke to the guy was all email gross and it's being shipped out right now and you know and I actually had another friend do the exact same thing they said it's awesome yes you know you know you just negotiate online and you know and your bank line and everything's online it's it's frictionless and that is good all these efficiencies that we're creating in the economy are gonna stay with us this is good it you know necessity is the mother of invention can and people now that it's necessary people have been forced to adopt you know this this technology and you know they should have done it years ago anyway but there was never a agency a reason yeah I agree you know it's funny like I one of the things that we studied I know you do is you know when you when you have these highs and you have these lows you know at the lows you learn you don't I I don't hurt you but when I make it money and learner's max yeah it's tough and we're not reading as much and we're not big as much and too much money it's one you know one thing stop that that happens you get a lot more curious and you know speaking of which it doesn't just happen to us but yeah you get a lot more curious and you want to learn more but also a lot of these people that have been sitting at home you know some are not using their time productively they're watching TV and drinking beer and eating potato chips but some people are being productive they're like learning new skills you know online you can go to the Khan Academy you can go to brilliant calm you can go to school sure you can go to you to me all these sites where you can you know you can go to code Academy and if you were an uber driver or a waiter and you were displaced now you can learn to code and do programming you know so a lot of people do you know I wrote two books and I know and the early stages of playing the guitar so I I I swear I went out of the iPad I've you know I bought a guitar and I start yeah you know I'm a beginner but what do you plan I've just got a few chords right now so you know I got a Taylor guitar yeah yeah what was interesting um you know Eddie Van Halen of course right the famous guitarists right do you know that when he started his guitar moves were so unique that he didn't want anybody to figure out what he was doing to make those sounds and he would turn away from the audience when he would play live and he'd go tap you know tapping the the neck and making those cool sounds that he makes with his guitars yeah that was like a trademark well I I'm I just don't I just figured out I'll hold it yeah yeah I bet you look cool though you're right it's like how do you spend your time or what do you spend your time on and I I'm pouring myself into this kind of recent like you because I the truth is there's a lot of money to be made a lot based on the new trends and then people are going to look back on this you know just like you predicted about location in 2012 yeah yeah you know like like you saw it you said you know you saw something a lot of people didn't see it's you know because of technology we can can be anywhere we want we can work anywhere we want I mean by the way you've done that I watched you move around and we're young hot and you can run your business from wherever you want yeah I know I could live in another country if I wanted to I could go live in Europe not that I want to but you know it's totally it's totally doable and folks people are finally starting to use that cord-cutting freedom that they've got and you know look they can live in in in one of your places or one of my places for way less money than living in LA in downtown LA or New York City or wherever and they'll have a better life that's the thing about it you know you just don't need to be in those cities anymore I have actually a buddy that was in real estate actually still is he he lived in Phoenix and he flew to LA every day yeah I mean and I'm like and he was like one of the top few on American Airlines that year and I go how did you do that he goes into this back and forth from LA every day he goes it's just like an hour commute and I first did it by airplane and and he did it because he didn't want to spend you know two to three million bucks on a home and he had an amazing home out here for a million right yeah hey why not you know I I just over from the airport and that's a little extreme that's taken a commercial airline every day but the point is is that you know he did by the way he's in a real he's in real state he just commercial/office you Industrial and they were out looking at deals and that you know private equity company you know interest oh yeah you can you know it yeah no you can do it they call those extreme commuters and a lot of people do that that live in Dallas right near the big Dallas Airport because you're in the center of the country and you know there are neighborhoods near the airport in Dallas where the airport shuttle actually drives into the neighborhood to pick people up so literally the airport shuttle is an extension into the neighborhoods because those are where these extreme commuters live I read a big article about that years ago it's the point is that these are real estate moves like because that's what I loved about your you know these trends and these pandemic investing in people need to stop watching the news obviously need to watch it too you know just stay updated but I haven't actually watched the news in almost two weeks just because it's kind of the same thing and I just watch the code numerous numbers go up but it's sad to watch but but for me I'm trying to figure out you know where you know I love Wayne Gretzky's quote you know they when he they said you know why are you such a great hockey player and he said well I never skated to where the puck is I always skated to where it was gonna go that's the rule of life right there that these are guys that's how these are these are what's happening you know the baby boomer generation moving back with their family that is definitely going to happen you know the the the the babies also you know nine months from now that's good divorces that's gonna happen you were already hearing about it here the those are things that are happening those are splitting households those are growing households and the roommates spinning up to shreds I'm tiling commercial office buildings you know we I talked to that my partner last week and you know we've already he's like yep we lost these tenants you know they're their businesses got wiped out their co but they just moved out didn't matter you know they had a lease or whatever so yeah they just broken it happening guys it's it's absolutely happening yeah yeah absolutely so they the the deal is don't be paralyzed by what's going on in the world surf the wave right it's a giant tidal wave and you want to get out in front of it you want to surf down the face of it and be in front of it before it gets there right and and and you're gonna profit from it and you know you're you really it's not just about you making money and profiting from it you're serving people like people need housing in these markets so you know you can provide it for them and and provide them an opportunity to escape the the city and business or start a business you know and of it the point is is again back to Buckminster Fuller you know don't fight the forces you know use them you know where are things going and just be out in front of them that's it and so that's you know whatever it is you're gonna do whether it's here and move your business Sarah you're gonna start a new business there you're gonna buy real estate there you know it doesn't really matter just know you're probably not gonna want to do commercial office yeah you're probably not gonna want to get involved in retail yeah those are those are those are things that are you know changing and and so I loved it Jason and I know people can get a lot more information on your you know on the stuff that you do and you know you were showing me some of the courses that you offered you know congratulations on all that this is really wonderful Thanks and can we put a special link up for your listeners and I don't know when you're exactly going to publish this I assume it'll be in the next week or show so but the link is Jason hartman.com slash Ken so Jason arm intercom which is our website slash Ken where you can get a lot more information on this and you know I think we'll stick the slides in there because there were a lot of graphs and for the people that only listened on audio if you only listened to the podcast and didn't see the YouTube then you can get get the visuals okay right Cartman has won in and and so I will go ahead and put that link up to Jason on the video and I just can't thank you enough for your time and let's jump back on you know in a couple of months because you know as I pour you might my heart and soul into the research and trends and study you do it's always good you know to compare notes yeah absolutely and then two months can a lots gonna change we know I can't wait to hear you know what you're working on next and and you know let's let's keep posted and thank you very much for you know such a credible information form yeah hey my pleasure and happy investing to you and all of your listeners and viewers can okay see you later Jason

Channel: Ken McElroy

Views: 196,387

Keywords: Rich Dad, Entrepreneurship, Investing, Personal Development, Get Wealthy, Earn Wealth, Ken McElroy, Entrepreneur, Rich Dad Advisor, Success, Business, Self-Help, Coaching, Real Estate, Real Estate Entrepreneur, Real Estate Investing, Freedom, Lifestyle Business, Hustle, the 10 commandments of pandemic investing

Id: 4Wl7dxPZaEc

Length: 80min 40sec (4840 seconds)

Published: Wed Jun 17 2020