Valuetainment - November 15, 2022


BIGGEST MARKET CRASH LOSERS - Types of Investors Who Will Lose It All In This Recession


Episode Stats

Length

9 minutes

Words per Minute

203.50456

Word Count

1,924

Sentence Count

201

Hate Speech Sentences

1


Summary


Transcript

00:00:00.000 So earlier this year, I tweeted us saying that interest rates, 30 or fixed, could crack 10%.
00:00:04.380 I talked about it on the podcast. I made videos about it. People said, you're out of your mind.
00:00:08.540 This will never happen. You're crazy. Cannot believe you're saying this. You spin out all
00:00:12.560 this fear porn. I said, look, guys, this is what I think is going to happen. We're in a weird
00:00:16.280 economy. I think we're going to crack 10%. When I said that, a Dave Ramsey came out and posted this
00:00:22.620 on his Instagram post to calm everybody down. Here's what Dave Ramsey said. So here's what
00:00:27.140 he said on Instagram. He posted something about it on June 29. Now keep in mind, the rates at that
00:00:31.020 time were roughly 5%. He said the following, the housing market is not crashing. Inflation,
00:00:37.820 recession, high interest rates, high fuel costs, labor market disruption, including the great
00:00:42.180 resignation, supply chain shortages, bear market, and the hits keep coming. Are we heading for the
00:00:48.000 end of the American economy? Is the housing market going to crash? Is this generation going to be
00:00:53.880 priced out of the housing market and never be homeowners again? He says, no, no, no. The only
00:00:59.160 one I want to talk about is the second one. Is the housing market going to crash? He said, no.
00:01:05.440 He says, sorry to end your fear porn party, but the sky is really not falling. It's definitely scary.
00:01:11.520 And some of the things going on truly do suck, but the sky is not falling. Now keep in mind,
00:01:16.420 I'm sure when the average realtor or loan officer reads this, they're like, oh my God,
00:01:19.640 that's awesome. Dave Ramsey, you're on our side. It's fantastic. Thank you for posting something
00:01:23.500 like this. You know, we need your support, but here's the reality of it. I don't want your support.
00:01:28.720 I want the truth is what I want. Because when this was posted June 29th, rates were roughly 5%.
00:01:34.840 You know what the 30 year fix is today? Roughly 7.5%. It's gone up 50% on the 5%. 2.5% it's gone up
00:01:44.460 since 5%. And it's only got another two and a half to go to crack 10%. Now people will say again,
00:01:49.600 Pat, are you out of your mind? Let's do a little homework together. Here's how interest rates have
00:01:54.960 been since 1970. And by the way, do you know what's the lowest 30 year fix has ever cracked?
00:02:00.000 2.65%. When do you think that was? Last year. Okay. You think that's going to last forever.
00:02:05.820 People were buying left and right thinking it's going to be all my home value. It's a $3 million home.
00:02:10.240 No, it's not. It's probably 1.7. We sold it for 3 million because rates were at 2.65.
00:02:14.460 It is not a $3 million home at 7.5% interest rates. It's just not. Everybody today is selling
00:02:21.100 their luxuries, their exotic cars, their planes, their boats. Just yesterday got another yacht
00:02:25.180 package coming up with new ones on discount. Yesterday, I'm at the airport looking at private
00:02:29.680 jets. Do you know what numbers they're discounting it at? 50%. Global Express 5,000. You know,
00:02:36.280 all these guys, discount, discount, discount. Why? Because some of these guys bought one too many
00:02:41.020 private. All the vacations home in Aspen right now. All these vacations home people have a second
00:02:45.300 one, third one, fourth one. Watch this. Here's rates the last 50 years. Let's take a look at this
00:02:50.540 together. All right. So take a look on 2021. It shows 2.96, right? The average third year for the year.
00:02:55.900 2.96. The year before, 3.1. 2019, 3.9. 4. 4. 5. 4. You'll see a bunch of threes and fours,
00:03:01.660 and you'll see five in 2009. Then you see sixes and eight, seven, six. Then you'll see fives again.
00:03:06.300 Then you see sixes, 1994, 8.38%. Then you see a bunch of eights and nines. Then 1990, what do you
00:03:11.620 see there? 10.13%, just 32 years ago. People have such a short-term memory. This was only 32 years
00:03:20.220 ago. Then you go 1989, 10.3. Tell me one year between 74 and 1989 where the rates were lower than
00:03:29.280 8.85%. You don't see one year. By the way, look at 1980, look at 1979, 81, 82, 83, 84, 85, 86, 87, 88,
00:03:39.200 89. Every one of those years, the average 30-year fix was over 10%. 11.2, 1979, 13.74, 16.63, 16%, 13.24,
00:03:49.880 13.88, 12, 10, 10, 10. What does this mean when we do our homework? When we actually do a little bit
00:03:55.360 of due diligence and stop falling for this motivational post to make everybody feel good,
00:04:00.200 everything's going to be okay. When I'm in the military, we're at war, I don't want my sergeant
00:04:05.040 to come up to me and tell me, hey guys, guess what? It's going to be fine. We're going to win this war.
00:04:08.880 Yeah, they may attack us from all these other places, but we're going to be totally fine. No,
00:04:12.460 I want my sergeant, my captain, my colonel, my sergeant major to be paranoid. I want them to say,
00:04:18.060 if they attack us from here, we got to do this. This could happen, guys. You could get killed. You
00:04:21.760 better stay alert, stay live. That's the mindset. This is why in the world of business, outside of
00:04:26.040 motivational speakers, in the real world of business, only the paranoid survive was a statement
00:04:31.880 and a book written by one of the greatest CEO of the past generation, Andy Grove, who everybody in
00:04:36.300 Silicon Valley duplicated. So rates 10%, maybe right now you say, man, the way patch is broken down,
00:04:42.120 10% is around the corner. What happens if rates go to 10%? What happens to a $2 million value of a
00:04:47.820 property being sold last year at $2.65, at $2 million? What do you think that $2 million home
00:04:52.980 is going to be worth when the rates hit 10%? 1.5? 1 million? Oh, there's no way it's going to drop 25%.
00:05:00.440 There's no way it's going to drop 50%. Okay, we'll see. Maybe I want to be wrong. I'm very
00:05:05.420 comfortable with not being wrong, with being wrong. But when you print as much money as America's
00:05:11.860 printed that we did the last couple of years, and we put fake success into the economy, people actually
00:05:16.640 think they're better than they really are. People actually get fooled into thinking they're
00:05:20.820 smarter than they really are. They're brilliant brokers. They're brilliant this. And anytime
00:05:25.500 you become a little too cocky, you lose. Yesterday, Dylan had a 150-point lead on me on
00:05:30.900 the dominoes while we're playing, and he's talking trash to me. I said, Dylan, be very careful being
00:05:36.220 cocky because you're playing against somebody that knows what they're doing in dominoes. You know how
00:05:40.360 the night ended? Daddy whooped his butt and enjoyed it. I'm trying to persuade this kid to believe,
00:05:45.580 don't get cocky. Your daddy knows how to be cocky. I lost a lot in my 20s being cocky.
00:05:50.820 I learned. Only the paranoid survive. So watch what Yahoo Finance says today in an article. Let's take a
00:05:55.600 look at what's going on in Las Vegas because Las Vegas is the leading indicator of what happens to
00:06:00.500 real estate. You ready for this? Let's read this together. Las Vegas is one of the leading indicators
00:06:05.140 for home price action in the housing market like we saw in 2008 and the recent frenzy. We are absolutely
00:06:10.380 feeling the heat here. The buyer pool has, for the most part, dried up, says Kristen Reifle, a real
00:06:17.220 estate agent on Las Vegas, tells Fortune. Now, look at the next one here at the bottom. In fact, as of
00:06:22.900 last week, mortgage purchase applications are down. You ready? 38% a year-over-year basis. That marks the
00:06:31.820 lowest reading since 2014. Next page. Look at this one here. Realtors are feeling it big time as well.
00:06:38.280 I put in a call to Greater Las Vegas Association of Realtors and the employee I spoke with said
00:06:43.420 that they were averaging about 300 new members every month, new realtors meaning. This month,
00:06:49.260 she has estimated 120. However, she has been processing, you ready for this? About 30 realtors
00:06:55.520 withdrawals a day, Reifle says. That means every day around 30 real estate agents in Las Vegas alone
00:07:02.200 are calling it quits. I wonder why. And by the way, this is just Las Vegas. This is not all across the
00:07:07.820 country. And these are some people that were making $2,000, $300,000, $400,000 a year income
00:07:10.660 that are sitting there saying, everything's dried up. People are not buying new homes. Mortgage is
00:07:14.120 not going there. So now here's a couple of things that could happen. All those people that were
00:07:17.440 saying, this is just fear porn. You're like Dave Ramsey. Don't worry about it. It's going to be
00:07:21.240 all right. Of course, long-term, everything's going to be all right. Of course, long-term, we're going to
00:07:26.840 be fine. This isn't a long-term conversation. The market does fine long-term. Dow's been up
00:07:33.140 long-term. Housing value's been up long-term. All that stuff's been fine long-term. But in the
00:07:38.800 current times, this could last a year to two years, maybe two and a half years. Elon Musk said
00:07:45.700 since till spring of 2024 is what he thinks recession is going to last through. Who does
00:07:51.760 that hurt? The people that were not ready for this season. And they heard the wrong opinion because
00:07:58.480 it's selective hearing. Just please tell me stuff I want to hear. I don't want to listen to what Pat's
00:08:03.340 got to say because that's fear porn. Just please tell me what I want to hear. And we avoid wanting
00:08:08.220 to hear reality. And this game can be an ugly game when all you want to hear is good news. So having
00:08:15.220 said that, for some of you guys that are still sticking around, I don't know if it's going to hit
00:08:18.940 10%. I'm convinced it will. I'm convinced it could go higher than 10%. And I'm convinced the next two
00:08:24.660 years is going to be very ugly. I'm convinced everything's going to be on sale in 2023.
00:08:28.940 I'm convinced after midterms, things are going to be very strange. I'm also convinced the day after
00:08:32.920 2024 election, Dow's going to have its biggest single day ever. I'm convinced S&P is going to
00:08:38.860 have its biggest day ever after 2024 November elections. I'm convinced of that. But that's
00:08:44.740 two years from today. So if you're watching this and you say, I still disagree with you, totally fine.
00:08:51.380 I made a video two months ago, three months ago, talking about why I believe the real estate
00:08:57.080 market bubble is really taking place. If you've not seen it, you may want to see it. And you can
00:09:01.960 ask me any questions you want on Twitter and say, Pat, I disagree with you in the following things.
00:09:05.160 And we can have a conversation. You can tweet me at Patrick Bay. David, I'll respond. If it's a
00:09:09.040 respectful comment, I'll respond to you. But I suggest you watch this video a little bit deeper
00:09:12.920 if you want to find out what's really going on behind closed doors when you look at the real
00:09:17.060 estate market. What indicators you and I should be paying attention to. Having said that, future still
00:09:22.020 looks bright long term, but it's going to be a little bit rocky short term the next 12 to 24 months.