Jerry Robinson on How to Make Smarter Investment Decisions in Unprecedented Times – EP 312

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You can’t deny it: we’re living in unprecedented times. Our post-COVID economy has seen rampant inflation in the wake of the sheer volume of money printed in 2020. You’ve probably felt it at the grocery store, the gas pump, your investments, and just about everywhere else.

Joining me to discuss this very hot topic is my friend Jerry Robinson. Jerry is an economist, entrepreneur, investor, and best-selling author. He’s the host of Follow the Money Radio, where he tells the fierce truths about global trends while sharing investment strategies and income ideas across many categories, including real estate. Above all else, he’s just someone I love to chat with when times get tough.

In this conversation, Jerry and I work to answer the “why” behind the state of our current economy–and help you craft an investment strategy to match. You’ll learn why so many new real estate investors are likely to take a big hit after two years of massive gains and how the most experienced investors can position themselves to take advantage of opportunities as we approach the end of maximum pessimism.

Key Takeaways with Jerry Robinson

  • Why unprecedented economic intervention means unprecedented consequences.
  • What the economic lag factor is and how it impacts you now.
  • How we have to operate for the first time ever with a worldwide fiat currency.
  • Why it’s great to invest when things are going from “bad” to “less bad.”
  • The opportunities that will exist as we near the end of maximum pessimism.
  • Why the Fed is having trouble pushing interest rates to even 4%–and how this affects all your investments.

Jerry Robinson Tweetables

“When you have unprecedented intervention, then you must expect unprecedented consequences.” – Jerry Robinson

“In this paper economy, in this debt-based economy owning something real, just like you said, silver, holding it in your hand, there's something powerful about that in this economy.” – Jerry Robinson

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Josh Cantwell: So, hey there. Welcome back to Accelerated Investor. This is Josh. And today I’ve got a great interview with my friend, Jerry Robinson. Jerry is the founder of a show, a weekly show called Follow the Money and on Follow the Money, weekly he delivers what he calls fierce truth about global trends, along with profitable investment strategies and income ideas in 22 different categories including, of course, real estate. His show is heard in 30 countries since 2010, and what their goal is to deliver what he calls truly important information about money through trends and through data that allows you to make smart investment decisions. He is a Christian economist, investor, and bestselling author, and he is on our show today to talk specifically about, number one, when you deliver unprecedented economic intervention, get ready for unprecedented consequences. That’s number one. Number two, he’s going to talk about the economic lag factor. Number three, we’re going to talk about how we are operating today for the first time ever in a worldwide fiat currency.

 

Number four, we’re going to talk about how after maximum pessimism, when things go from bad to less bad, why there’s actually a great time to move into investing. And right now, we are past, according to Jerry, max pessimism. And finally, we’re going to talk about the federal funds interest rate and why the Fed, after over three decades of an average of 5.67% Fed funds rate, why they’re having trouble pushing it to even 4% and how this impacts all of your investments, including real estate. This is a fantastic interview with Jerry Robinson from Follow the Money. You’re going to love it. Here we go.

 

[INTERVIEW]

 

Josh Cantwell: So, hey, Jerry, listen, thanks so much for carving out some time. I love to speak with guys that are operating in today’s market buying and selling, investing, trading. You’re one of those guys so thanks for joining me today on Accelerated Investor.

 

Jerry Robinson: Josh, it’s great to be here. Thanks for the invite.

 

Josh Cantwell: You bet. Now, listen, my audience already knows you through Bankruptcy of Our Nation that you wrote back in 2009, updated in 2012. There’s obviously some things that people are comparing today to things that happened back in 2009 and what we thought was the bankruptcy of our nation and all the quantitative easing that happened. Now, it all happened again with COVID and now it’s all backfiring because of inflation. So, I guess the first thing I’d love to know, Jerry, just your take on the market. Like, what is going on? What are you thinking about when you’re making investment decisions today? What are some things that you’re tracking and watching?

 

Jerry Robinson: Sure. Good question. So, when I wrote the book Bankruptcy of Our Nation, which as you mentioned, is now about ten years old, we were informing people of what was actually at the foundation of the economic crisis that unfolded in 2008 that caught so many people off guard. To identify that, we had to go back in history to explain how we got to where we were. So, when we look at 2022 and we say, “Well, why is inflation outrageous? Why are we having all of these issues?” Well, we have to go back in time. Nothing exists in a vacuum. And so, we can certainly find the problems of 2022, Josh, by investigating what happened in 2020. In 2020, in April, May, June of this time frame of 2020, the government was printing more money than it had in two centuries to fight COVID-19, which apparently many of the people in America didn’t even believe was real. Everybody remembers this. I mean, we’re still I guess in the woods with this.

 

But there was a great debate about whether this thing was worth spending money on or I guess not worth spending money on, whether it was real or not, which was kind of absurd. But at the same time, what we have now is we have the fallout from that. So, in 2020, more money was printed than two centuries, the previous two centuries combined. More money was printed in that year. So, when you have unprecedented intervention, then you must expect unprecedented consequences. And that’s what we’ve been seeing. So, we’re living through the turmoil of decisions that were made previous to this because economics, for those who are familiar with economics, there’s a lag factor. So, it’s difficult to push a button and make something happen immediately in economics. It takes a minute. Even the Fed when they lower rates or they raise rates, it takes a minute. So, there’s a lag factor. So, we’re living in the wake of the decisions that were made in 2020. We will be living in the wake of the decisions made in 2022 when we get to 2024, and so on and so forth. There’s a lag factor.

 

So, much of what we are dealing with has to do with the decisions that were made in 2020. If you agree with those decisions that were made, then good. And if you don’t, then that explains probably why you don’t like what we’ve been seeing in 2022.

 

Josh Cantwell: I love it. I agree. Jerry, you mentioned all the unprecedented intervention and the unprecedented consequences. Is there a time that you studied when you wrote Bankruptcy of Our Nation that is anything similar to this? Is there anything to look back at in our history that says this is what we can expect going forward? Is there anything to hang our hat on to say or is it literally we’re blind and we’re really operating in a scenario that nobody’s really gone through before?

 

Jerry Robinson: Some have compared it to the 1970s and the inflation that was there. Some have compared it to the 1930s as well. The problem with those illustrations have to do with the fact that we are now in this fiat currency world. Now, the 70s, we were in that fiat currency world but it was still unraveling. Now, we are in a place where literally money is just debt. I mean, the currency that we have here in the United States is literally just an IOU. It’s not backed by anything. And we go into the book, Bankruptcy of Our Nation, and I explain the petrodollar system about how the United States used oil instead of gold to back its dollar. So, OPEC and all these other countries have to buy used dollars to sell their oil. This creates an artificial demand for the dollar, which then allows the federal government a permission slip to print more currency because there’s artificial demand for that currency. I would say that when I look back through history, I don’t see anything similar to this fully because we have never seen this amount of money pushed out this quickly.

 

We were warning in 2020 that this was absolutely unprecedented. Sadly, Josh, there wasn’t much pushback at the economic policies of 2020. There were many pushbacks about the public health policies but it was almost absolute crickets on the economic policy. So, as they were literally pushing out tremendous amounts of money and mailing out checks and all of these things, there wasn’t really any debate on that. I think that also might be unique. Even in 2008, there was debate about the response of the economic response. I think in 2020, we were just really kind of fully exposed to the idea that the government can really just print as much money as it wants to. It doesn’t matter if you’re right. It doesn’t matter if you’re left. It doesn’t really matter. I mean, everybody seemed to want the money printed. Nobody seemed to do anything about it. No one tried to stop it necessarily. So, I think that kind of situation doesn’t bode well for us going forward, Josh, because if this is how we’re going to respond to a pandemic, we can’t do this again. And if there’s going to be another pandemic that catches us off guard, we can’t do this again like we can’t possibly survive from this being the response to every single pandemic that comes along.

 

So, in other words, what it’s exposed is that our knee-jerk reactions to things are unsustainable. We have to have a better plan. And I don’t see a better plan at all being proposed. So, therefore, to sum that up, it is incumbent upon the viewer, the listener, to take action to prepare himself realizing that the government will not save him. The government will try to save him but they’re not going to be able to do that forever. And in fact, when we look back at 2020, Josh, who did the government save but the investor, right? If you were invested in our stocks, well, the Fed had your back. If you were invested in real estate or anything else this is who – the investor class is protected. And I think people who are not investors, who are trying to figure out how do I make this thing work for me, well, you follow the rules of the game. And the Congress is very clear and so is the presidency and so all of it favors the investor class. So, if you’re not an investor, you probably got hosed in 2020. And even if you were an investor in 2020, it wasn’t fun.

 

Josh Cantwell: Yeah. Even if you were an investor, right? Now, what’s shaking out from that is right before 2020 when COVID hit, we saw the stock market obviously doing very well. The economy was still on fire. Obviously, going into that election was chaos, all the riots and everything that had happened. But the economy was in really good shape, right? Unemployment was very, very, very low. Gas prices are very, very low. And the cost of debt was starting to rise. The ten-year Treasury was going up. The Fed was starting to bump up interest rates and almost to no real not very newsworthy if you will. Then COVID hits, all of a sudden, all this printing happened, $7 trillion or whatever the final number was, and interest rates go to zero. So, if you’re in the investor class at that point, now you have more money that you were basically given. We were given money through PPP loans, literally given, and then it was written off as a forgiveness to cover payroll and all those kinds of things. But now you could borrow money at extremely low rates. The ten-year Treasury went down almost 1%. The federal fund rates did go down to 1, so the cost of money.

 

So, as soon as people knew that the whole planet wasn’t going to die from COVID, we were going to survive that, now, the investor class started getting back on their feet and they started investing and they had all this cash to work with and they had all this cheap debt to work with. So, that’s what you’re referring to.

 

Jerry Robinson: Correct.

 

Josh Cantwell: You have this cheap cost of money, very accessible money. So, now you can go buy stocks, bonds, real estate, crypto, whatever you want to buy. And it was all going up not only because it was at the bottom because of COVID, but now money is very, very accessible. So, I think what it’s exposing now, Jerry, is a lot of people I think ran into this honeymoon phase of everything’s going up, everyone’s going to make money. Now, what we’re seeing going forward from now, going forward, obviously, rates are going up, the ten-year Treasury is going up, we’re talking about inflation, the results of everything you talked about 2020. Now, we’re going to find out where the real operators are. So, in my world of real estate, you have to have an operator that really knows what they’re doing, how to manage cash flow, how to manage residents, how to manage collections, how to manage construction, how to manage people, not how to swing a hammer but manage all the guys swinging hammers. Like that’s a real business.

 

And so, I think what’s going to happen, part of my expectation is that some of the people that got lulled into thinking they were good investors and good operators because money was cheap and abundant, those guys are about to get kicked in the teeth and real investors like you and me are going to be ready and positioned to scoop up some of these opportunities. So, that’s kind of what I think. Where do you think this thing shakes out over the next couple of years? Again, you say the lag of maybe two years later, the results of 2022, this inflation, the rising cost of gas is going to knock some operators out, going to knock some businesses out. How are you positioning yourself to take advantage of that stuff a couple of years from now?

 

Jerry Robinson: Interesting. Okay. Yeah. So, in 2020, we really should have had a recession. So, that’s when the recession should have happened. It was delayed. And then, of course, now we’re living through a time where we do have these two quarters back-to-back of contractions, which is typically the loose definition of a recession. When you look at other economic data, it’s difficult to discern. In fact, that’s why the NBER hasn’t called officially a recession yet because there are still other economic data points that don’t confirm the recession, even though those two do, those two quarters back-to-back. There’s other data that just doesn’t make it clear. And so, for example, when you look at the latest jobs report, it was better than expected. When you look at the latest inflation report, the CPI report, we saw disinflation that is moving from 9.1% in June down to 8.5% in July. So, you have a period of disinflation here. Basically, where I see the economy going over the next two years, Josh, is from what we often call bad to less bad, and that’s a great place historically.

 

When max pessimism is reached, typically the market itself has already bottomed and is already moving back higher. So, overall, whenever the consumers and businesses reach just max pessimism, this is usually the bottom is already well in months ago at that point. So, I would say that right now we are near that max pessimism. I’m of the opinion that over the next couple of years, a lot of the things that we have seen are going to get less bad, less bad, not that they’re good but they’re going to be less bad. And so, that means that there’s going to be a lot of great opportunities. Now, you in the real estate business there, you have a good bird’s eye view of what’s going on in your market. From what I see from my understanding of the markets with the real estate market, we are certainly going to see some pullbacks. We already are seeing prices fall across the country in especially some markets. Other markets are very resilient and it remains to be seen whether these high-interest rates will literally dislodge the amount of buyers in the market.

 

For example, where I’m at now in kind of middle America in the Midwest, we still see elevated prices. We still see plenty of bids, even with interest rates where they are. Now, let’s talk about interest rates real briefly, that is where do we think those are going to go? Well, we’ve been telling our members and our students here that we expect the interest rate level to get up to about no more than 4%. Now, that may be shocking because some people have suggested there’s no way to rein in this inflation without massive inflation rates, reminiscent of, say, the Volker era, where we have 20% interest rates or whatever. I would suggest, based upon the fragility of the underlying economy, that you would not be able to pull that off in this era. The debt-based society that we have created cannot stomach or handle those kinds of interest rates, let alone for a sustained period of time.

 

Josh Cantwell: 100% agree.

 

Jerry Robinson: So, if you look back for the last, say, 30 years, Josh, and you say, “What’s the average Fed funds rate? Like, what’s the average? What was it average?” Well, for the last three decades, it was 5.67%. Now, if we raised interest rates to 5.67% right now, Josh, I mean, you would be talking about some foreclosures, bankruptcies, all kinds of things, 5.67%. So, remember, this is why we look at the economy and we say, “Is it really good? Is it really good? Can an economy that can’t even have an interest rate that is its 30-year average? And you go back even further, it’s even higher. So, is it possible that this economy can be good when it can’t even stomach an average interest rate of, say, 5.6%, 7%? So, I would say that the Fed is stuck in the fact that it wants to raise those rates. It wants to be able to tame this inflation quickly but it knows that it’s dealing with the economy that it can’t quite say out loud because they have to sustain the faith, they have to sustain the idea that everything’s fine. But deep down, they know this is a sick economy and the fact that it can’t handle the rates that it used to handle. Why? Because there’s so much debt, corporate debt, personal debt, mortgage debt, student loan debt, credit card debt. I mean, just to government debt, state debt, local debt. It’s incredible.

 

So, these interest rates now are of a major burden for the economic planners and the monetary policymakers and for fiscal policymakers. So, I think we’re caught in a time where we may want to raise interest rates but we may actually have to live with it in a higher level of inflation and learn to live with that as opposed to raising interest rates and erasing the inflation. We may be past that. That ship may have sailed. We may not be able to bring the inflation rate down to where we once had it because that option may not be available to us the way it used to be.

 

Josh Cantwell: Yeah. Everything that you said is exactly my investment thesis right now. I have investments that we’re still making, apartments that we’re still buying, self-storage facilities that we’re looking at that are very B-class suburban that everybody would need to live in, that everybody could afford. Like every nurse, every teacher, every housekeeper.

 

Jerry Robinson: Great business plan. Yeah. Affordable housing. It’s what we teach. You know, it’s so powerful.

 

Josh Cantwell: $1,500 a month, $800 a month, depending on location. Everybody can afford it. It’s upgraded. It’s modern even though the vintage might be 1960s, 70s, 80s, 90s, we’ve upgraded it so it’s a great place to live. We’ve bet on exactly that, that we feel like interest rates are going to go up in the short term. They’re going to try to tame inflation as much as they can without completely tanking the economy. And we learned from the Volcker era that we can’t just push interest rates, push interest rates, push interest rates because it will create a major, major recession. So, they’ve learned from that. And, Jerry, as you and I both know because we both studied this stuff worldwide, every other major economy has the same strategy as the United States. China, the European Union, all of them are doing the same thing. They’re just debasing their currency by printing more money. Now, everybody’s got this inflation that they’re putting up with and they’re having to raise rates but can only, in my opinion, do it in the short term without tanking all of the global economies. We probably need a worldwide reset, which nobody wants, right? Nobody wants a worldwide reset. So, they want to manage it as long as they can.

 

And you’re seeing this now, even with China, with all of their real estate debt that they have because they built a substantial portion of their economy off of real estate development, which now nobody wants to buy. So, they have their own problem now that we experienced back in 2007-2008. The other thing I think why real estate in particular is going to continue to go up in value even if interest rates go up is because there is, you know, we have an affordable housing problem. We don’t have enough affordable housing units. We have a lot of these millennials that are 30 and 35 years old that are forming households now and that want to move out of their downtown loft into the suburban house with the wife and the kids. There’s not enough real estate to support them. There’s not enough real estate to support all the household formation. And so, even though there’s going to be a taming down I think of prices, long term, I think real estate still continues to go up in value but be very incremental, maybe 2% a year or 3% a year to 4% a year. We just don’t have enough houses. And that we’ve built in order to sustain and house everybody that wants a house right now. So, again, that’s one of the reasons why my investment philosophy is that suburban B-class apartments are going to continue to be in favor because these people have to live somewhere.

 

Jerry Robinson: It’s a wonderful way to think. I mean, it’s the right way to think, Josh, because, in fact, that’s the decision we’ve come to as well. I mean, for years now, we have put more into real estate than almost any other asset class. What we try to teach our members to do is to look at all the various asset classes that you could possibly invest in. You have real estate, you have stocks, you have bonds, you have commodities and hard assets, you have cryptocurrencies, you have all of these different types of asset classes. And what we teach our members and students to do is say, “Look, figure out on a pie chart what you want that to look like.” Obviously, you want to have a financial advisor. If you don’t know what you’re doing, sit down with a financial advisor. But for us, that number for real estate came out to about 40%. So, we said with every new dollar that we have that we could put into something, anything, besides a jar in the backyard and bury it, you’re going to have to put it somewhere because you’re trying to protect your purchasing power over time. Then real estate takes up a full $0.40 out of every investable dollar we have. We like real estate.

 

Now, our strategy is slightly different. I like your strategy. We go with three-bedroom, two-bathroom homes in affordable areas, good working-class neighborhoods. But the kicker is for us is that we would have to live in the house. If I wouldn’t move my own family in the house, then we don’t buy it because we might have to live there one day, you know? So, the point is, is that, “Hey we’re going to go out and buy something that we…” And plus, it also helps with tenant selection. You know, if you buy something you would live in, well, then you’re going to be able to have better tenants easier. So, that’s our strategy. But then you can also look at the stock market. Many people say, “Would you invest in the stock market?” Well, we do. You know, we put a portion of our investments there but we don’t go all-in to the stock market. How about cryptos? Do we invest in crypto? Sure. But we don’t go all in into cryptos. What about other assets like commodities and hard assets and collectibles? Sure. All of those things are fine. The problem is, is when people swear off whole asset classes like real estate, “I’m never going to invest in real estate or I’m never going to invest in the stock market.”

 

Well, when you start dwindling down these options, you realize that you’re fighting an uphill battle and you’re ruling out entire asset classes that could help you protect your purchasing power because you heard something on the news or because you don’t like this or that. So, it’s important to understand that a holistic financial plan that is spread out across various asset classes, but obviously with a plan, is one of the most powerful ways to protect yourselves going forward. Now, the reason why I don’t go 100% into real estate because I really like real estate as an asset class, is because of the rules of the game can change. The Congress makes the rules. The IRA – what’s that?

 

Josh Cantwell: It’s also not super liquid, right?

 

Jerry Robinson: It’s not. You’re right. Exactly.

 

Josh Cantwell: It’s because I buy a commercial building. Now, I want to put it on the market. By the time I put it on the market, list it, tour it, find a buyer and then go through 90 days, it takes me more than six months from the time I think about selling it to the time that it’s actually traded versus I’ve got to keep liquidity. I can keep money in stocks, bonds, mutual funds that could keep someone in crypto silver. These are all the things that we’ve done. And I can participate in these other asset classes and be liquid so that if there is a storm in commercial real estate. And the only time you lose money in real estate is when you sell at the wrong time or you sell through a balloon at the wrong time. You can weed things out if you have the right kind of debt, the right kind of capital stack, right kind of structure. But we don’t want to have everything there. On top of what you said, I believe in everything you said, Jerry, about diverse asset allocation. Liquidity to me is also important, right? Because if we want to be, again, forever passive income and be liquid and retire and be independent, we’ve got to get access to some of that cash like maybe tomorrow if we need to.

 

Jerry Robinson: Very true.

 

Josh Cantwell: Sometimes real estate doesn’t provide that liquidity.

 

Jerry Robinson: So true. Yeah, that’s why. That’s exactly why. So, again, for us, real estate composes a pretty large chunk of what we invest in and we teach others to do the same because it is a tax-advantaged asset. I’m sure you’ve gone over all the benefits of real estate. But I mean, there’s tremendous tax benefits. There’s tremendous benefits to the investor, plus the peace of mind of knowing you own something real. You know, you really do own something real. In this paper economy, in this debt-based economy owning something real, just like you said, silver, holding it in your hand, there’s something powerful about that in this economy.

 

Josh Cantwell: There is. Absolutely. Well, listen, Jerry, I really love the insights that you provided today. You mentioned your members. I know you’re an investor, a big-time investor, but also coach people to be good and holistic and proper investors. I’m sure they can start at your website, FollowTheMoney.com. You have a number of different services, free services, a couple of different membership programs. When they go to FollowTheMoney.com, what will our audience find there?

 

Jerry Robinson: They’re going to find a website that on the front end, they’re going to find a tremendous amount of free information. They’re going to find our podcast. They can sign up for our free email newsletter. We’ll send them out ideas occasionally. They can also become a member there. We have a big summer sale going on right now where we share all of our research, data. We do coaching calls, we have a trading software, investing ideas, just all manner of stuff. An income university with 22 different income streams you can create both now and in retirement, one of those, of course, being rental real estate. And so, they’re going to find a tremendous amount of free and premium services. But the kicker, the key thing that we do here, Josh, is that we teach people to take control of their financial lives and we teach them to rely upon trends and upon real data, not opinions. Not opinions.

 

So, many people will go out to social media and they’ll see what people are doing and then they’ll just copy. That’s a terrible way to do your financial plan. We want to teach people to empower themselves. And when they become a member here at Follow the Money, that’s what they get. They get empowerment. They get equipped so that they can begin to make a big change in their financial life and break free like you were talking about. And real estate’s a big part of that.

 

Josh Cantwell: I love it. Jerry, listen, this is a great interview. Thanks for all your insights all the way back talking 1930s, 70s, 2009, 2020. There’s always, always takeaways from the past. History does repeat itself. We know that. So, thanks so much for taking out some time today for us at Accelerated Investor.

 

Jerry Robinson: Oh, it was a pleasure. Thank you, Josh.

 

[CLOSING]

 

Josh Cantwell: Well, guys, there you have it. Listen, I thoroughly enjoy talking to really smart investors who empower my audience and empower my members with real economic data and real trends and that’s exactly what Jerry did today. If you enjoyed this interview, please leave us a five-star rating and review. Literally, go open up your phone. Right now, you’re probably listening on your phone. Open up iTunes or YouTube and click the little five-star rating button. Click the little review button. And also, don’t forget to smash the subscribe button so you never miss another episode of Accelerated Real Estate Investor. We’ll see you next time. Thanks for being here.

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