Mind Pump: Raw Fitness Truth - 1657: Why the Economy Won’t Crash With Peter Linneman

Episode Date: October 7, 2021

In this episode, Sal, Adam & Justin speak with economist Peter Linneman. Although it seems like inflation is getting out of hand, Peter lays out why he thinks it is not as worrisome as it may appear. Why are we seeing supply chain shortages today? (1:59) How do you explain the soaring housing market?! (7:52) What to watch out for in the current economic climate. (14:15) Where would be the best places to invest/grow your money? (19:13) What industries should we keep an eye on? (23:38) As income goes up, so does spending. (29:40) The great advantage of affordable housing. (34:21) Why the Fed has been terrible at predicting its own interest rates. (36:54) Floating or fixed mortgages? (38:50) His favorite places in the US to invest in real estate. (42:00) Related Links/Products Mentioned October Promotion: MAPS Anabolic and NO BS 6-Pack Formula – Get Both for $59.99!    Visit Chili Sleep for an exclusive offer for Mind Pump listeners! Mind Pump #1580: Economy Crash 2021 With Peter Linneman What Happened to Oil Prices in 2020 - Investopedia Used Car Prices Are Sky-High. Can We Expect That To Change? A supply shock is about to hit the housing market—the question is how big? 3 Reasons Why The Real Estate Market Boom Is Not A Bubble Real Asset Definition US to end travel bans for vaccinated passengers Timeline: History of the Housing Market Over the Last 50 years Mind Pump Podcast – YouTube Mind Pump Free Resources

If you want to pump your body and expand your mind, there's only one place to go. MIND, MIND, MIND, MIND, MIND, MIND, MIND, with your hosts. Salda Stefano, Adam Schaefer, and Justin Andrews. You just found the world's number one fitness health and entertainment podcast. This is Mind Pup, right? Today's episode is a little different. We interviewed Peter Linman, he's an economist, an expert on the economy, and we asked him everything about what's happening right now in our economy. Is inflation

bad or crazy? What about these shortfalls and the supply of our products? Everybody's warning us about that. Are we in a bubble? Is the economy going to crash? Good news in this episode, explain why it's not as bad as they say it is and he breaks it down. Really really fun episode, we always like talking to Peter. Now this episode is brought to you by our sponsor, Chili Sleep. Now they make products that cool and warm your bed

to optimize your sleep quality and the length of time that you stay asleep. And they only even have products that make one side different than the other side. So if your spouse likes it warmer or hotter than you or cooler than you, that's okay. Everybody gets along because they can change the temperature of their side and you can change the temperature of your side. Also of course because you listen to Mind Pump, you get a discount. So head over to chileysleep.com.

That's CHILI sleep.com forward slash mind pump and on that page there's an exclusive offer and discount code for mind pump listeners. Also all month long we have combined MAP centabolic with the no BS six pack formula put them together and discounted them heavily. You can get both right now lifetime access for one payment of $59 and 99 cents. This is a savings of over $100. If you're interested or you just wanna sign up, head over to mapsoctober.com.

Once again, that's mapsoctober.com. We wanted to start with by asking, because it looks like now, when we had you on last, we speculated about inflation because of the money printing. It looks like they're now admitting, oh yeah, inflation's happening, although we're also hearing that this is transitory

or whatever, we're also hearing about supply chain shortages. Can you kind of explain what we're seeing right now with rising prices and then what do they mean exactly by supply chain shortages? Where are we seeing that? Okay, so let me give you a short answer and a little color. Short answer is there is year over year inflation, but remember how bizarre last year was. So whenever you do a year over year comparison of anything, you got to think what was a year ago. So if I told you, wow, I'm walking 100% more than I did a year ago, 150%. Yes, but you were down with surgery a year ago, right? It's not a reflection on how much you're doing

now, but you just came out of surgery a year ago. Well, the economy a year ago was on its deathbed. No one raised prices last year. They didn't even raise the price of toilet paper last year. Think about that. Huge demand, no supply, toilet paper price didn't go up. And by the way, late April, the price of oil was negative. Not just low, it was negative. To get rid of a barrel of oil, I actually had to pay you to take it from me.

Well, that's not normal. And those things rippled through the economy. And I'll give you one other, used cars. Well, one of the main sources of use cars supply are the rental company. The rental car companies, right? Because they turned their fleet over. Last March, April, May, June, they were all going bankrupt. Because nobody was running cars, right? What did you do to get cash when you're going bankrupt? Sell your cars. So they sold a huge proportion of their cars into the used car market. By the way, who was buying cars last April, May, June? Nobody. So the price of used cars plummeted with extraordinary supply and extraordinarily low demand.

Now let's come back a year later and think about these things. Okay, so, well you just got out of surgery, right? You just got out of surgery. Nobody raised prices last year, even if they could. Can you imagine what would happen if the toilet paper companies would have raised their prices to toilet paper? They'd have been crucified, right? So they didn't raise them. But this year they're raising them for two years crucified, right? So they didn't raise them. But this year, they're raising them for two years' worth, right? And maybe a little more. And let's go back to the used car example. The used car example.

Well, this year, the rental car companies have no cars to sell into the used car market because they sold them all a year ago. They don't have any. And on top of that, since the economy is more or less recovered, people are buying cars again, including use cars. What do you think happens to year over year change

in auto-cars prices? They skyrocket. Absolutely skyrocket. And in fact, 20% of the 5 slightly over 5% increase in prices. That's occurred year over year. 20% of it was for used cars. 20% of all the price increase on average was due to one thing.

Use cars. Did any of you buy a use car in the last month or two? No. Probably not. So, but it went up. And it's about how bizarre it was a year ago. And by the way, still going on. Oil. Gee, oil went from negative to kind of normal.

You think that skyrocketing inflation coming from that as it goes through. But it's more of a return to where it was. So yes, you just got out of the hospital with hip replacement a year ago. You weren't walking very much. This year, you're recovered. So if I did a year over a year from Paris,

of course you look like you're walking tons, but you're really just back to where you were, kind of when you were healthy. There's a lot of that going on. And I only give you a couple of examples. You added that things like border controls on cross- cross border transactions, some of them relating to tariffs and trade wars, but some of them relating to safety, right?

We don't want dock workers, not dock workers, ship workers, et cetera, et cetera, et cetera. Vietnam, Vietnam closed a lot of their factories. Just closed them. Well, you talk about what supply chain problem mean. If Vietnam closed their factories, they were providing it to somebody. Why did they close it because of COVID? So you've got a lot of that kind of stuff going on. And it's real in the one hand, and in the other hand, it's completely anomalous. And you've got to kind of step back and look at it in a little bit.

So most of the inflation you're seeing is anomalous, or purely reflective of how bizarre last year was rather than this year so Exceptions, but that's the short version so Peter that that explains kind of the goods and service side of it Pretty well, but what about what we're seeing in the housing market? I mean the housing market is now that's out of control and that hasn't slowed down and that was even high last year During all this. So how do you explain that? And rent.

And rent. Yes, yes. I mean, last year, Rents didn't go up because no landlord wanted to be a headline, right? No landlord wanted to be a headline. And by the way, you didn't even know if people were going to pay you last year. This year, landlords are getting two years of rent increases plus the supply slowed down last year, right? Because of the shutdowns of COVID and projects that were delayed. So guess what? This year rents are way up on the rental side. And you go, of course, this is, that's

not monetary being created, right? That's just, you reduce supply, you increase demand, you don't raise it, now you raise it two years worth. You, an outcome to single family, we have under produced, we have about 145 million housing units in the United States, just roughly. And back at the envelope, I'm gonna be real fast. 100 million of them are owner-occupied, 45 million are renner, okay?

Over the last 20 years, largely because of NIMBYism, not totally, but largely because of NIMBYism, we have under-produced single-family housing of nambism, not totally, but largely because of nambism. We have under-produced single-family housing by about three and a half million units. So 100 million under-supply by three and a half million. And on the multi-family side, about 500,000 on 450,000. So something like 1% under-supply on multi doesn't sound like a lot except people need housing. They need housing. So a 1 or 2 or 3% shortfall doesn't do anything to

the price of bubble gum because if they try to back jack up the price of bubble gum people say I'm not going to buy bubble gum. I don't need it. Housing, very different. So a 1 to 4% shortfall in multi and single family, big deal, big deal because people will bid up the price. And that's what you've seen in both markets for over a decade with the oddity of last year for a little bit. Now, it's a fundamental under supply of housing. Again, that's not monetary. That's about local ordinances and taxes and so forth. Fundamental over supply is not going to go away.

Come on, think about it. We've under produced 4.5 million units. One percent of the housing stock over the last 20 years. We're not going to eliminate that in a month, especially in the face of nimble years. That's why prices have been going up steadily. Why did single family go up more than normal? And the reason is you need a down payment to buy a home, right? Not only do you have to make the monthly, you need a down payment.

That's a big problem with a 10 to 20% down payment because people don't have 20 or 40 or 50 or 60,000 laying around. What happened during COVID? What happened during COVID was, or especially a year ago, you got refunds on your holiday trip. You couldn't go on a holiday trip. You got refunds on your baseball tickets. You did go to the football game last year. You didn't go out to eat. It didn't buy a nice new dress, et cetera. And you're saving skyrocketing. And there were people, lots of them, that saved more than nine months than they had in nine years. And suddenly, they look around and say, I can afford a down payment. I would have never adjusted my lifestyle to afford it. But my lifestyle got adjusted for me and I can afford the down payment,

and that caused the surge. And then I had one other thing. The other thing is, what was the age of most of the people dying of COVID? Most of them were 70 and 70 years and older, right? And most of them, most, not all, about a third of them were dying within months of when they would have otherwise died from some reason. But about two thirds of them died anywhere from two to ten years earlier than the otherwise would have died. Why is that relevant for homeownership? For homeownership? Because they died earlier than anybody expected. And what did they leave? They left an inheritance to you guys. And we're not talking about big money.

Suppose somebody had a life savings of $200,000. And they have two kids and three grandkids, five in heriters, 200,000. Because they died years earlier, five people got $40,000 in heritins many years earlier than they would have and used it for a down payment. So we're not talking about rich people. We're talking about normal. And so that fed this surge you saw in the single family is that money for down payment was there because of involuntary savings and unfortunate early COVID deaths.

Those two are going to moderate, right? Lifestyles are coming back. I'm going to a concert tonight. People are at the ball game the other day, right? So the savings part is disappearing and thankfully not as many people are dying early and leaving requests. There's still some. So the single family side under-produced home prices will exceed inflation for a good long while because of that. And on top of that, you have the surge that will monitor it. Peter, when you look at the the economic climate, is there anything that you think people should watch out for or keep an eye on or anything that worries you at all.

Oh, of course there's a map. There's a map and things that worry me, but none of them keep me up at night. The only thing, let me take the one that a lot of people would answer, which is, gee, the Biden Democrat, whoever, whatever you want to call it, taxes are going to go up and that's going to kill the economy and blah, blah, blah. And by the way, the Democrats will say, since we're spending so much, no, that will offset it and blah, blah, blah. I'm 70 years old and I've been through kind of every kind of politician combination over the years, do politics matter to the economy?

Of course, are they more matter about who wins and who loses than how much in general? Right? They're more about you win, I lose. Well, your win kind of cancels out most of my loss, not all of it, maybe, but most of it. So politics is much more about who wins and loses than the overall drag. Yes, there is no doubt that higher taxes put a bit of a drag on the economy, but we're talking second order.

You know, like, let's say GDP grows 2.5% a year on average, maybe it's a 20 to 30 basis point drag, 2.10% 3.10% a year. That's a real number on a $21 trillion economy, and especially if you did that for 30 years, it would add up. But when you look at the big picture, it's rounding air versus all the other things that drive the economy or slow the economy down. And so I don't worry, I mean, I don't worry about government actions, governments always do stupid things through my entire life. One of the things that distinguishes

the United States is we tend to do less stupid things than the rest of the world, which is appalling when you think about it, right? It's like, wow. And yet, so we carry on. We're more powerful than their mistakes. And their mistakes are serial. They're not limited Democrats or not limited Republicans. They're not limited to today. It's always been there. So I don't worry about that.

That doesn't mean I don't have an opinion, but I don't worry about that. That doesn't mean I don't have an opinion, but I don't worry about that. What do I worry about? Here's a thought that should terrify everybody for a moment, which is what if Delta is a really mild variant in the big scheme of things? That 10 years from now, we're doing an episode, and we look back and say, remember how mild Delta was, how non-contagious Delta was, how non-Viriland Delta was?

Because future variations became even more virulent and more transmittable, right? So there is this sense floating around that Delta is as virulent as it'll get. Well, we don't know that. I hope it's true. We don't know that. And it's very possible that two years from now, because this isn't going to go away biologically, we may live with it perfectly over the next two years, and then another variation comes up that really hammers us. So that worries me.

The reason I don't slit my wrist over that is the can address such things is stunning in terms of coming up with reasonably effective vaccines. Now, it'll be expensive, right? But so I don't worry about that. What else should people worry? Look. Okay. Repeat what you said in Washington.

You broke up right here right there's an old phrase I think it's a tribute to decomphile, but I'm not sure which is no man's safe while the legislatures in session And that's been a good crude guide To my view of the world By the way, it doesn't say no men say fall the Democrats are in session or the Republicans or the Tories or the Liberals. So it's just, it's a broad statement.

So Peter, let's say somebody's in a position to invest. They've done a good job. They're moderately successful. They've saved money. Knowing how things look right now, where would be the best places for them to invest, to grow their money and protect their, their, their wealth? Get in, get in assets, get in real assets. I wouldn't do bonds. Get in real assets. That could be real estate.

It could be a really good company, right? A really good company is in the real economy, right? They're selling things that ever higher prices as things go and they'll be bad years and good years. I would say get in real assets. And I would tend to want to get into less volatile real assets. But for example, Bitcoin is not a real asset, right? It's an asset, but it's not a real asset. There's no cash flow, there's no whatever, whatever.

It doesn't mean it's a dumb investment. I can't figure it out, but there's a lot of things I can't figure out in the world. I would get in real assets. So I would say and get in real assets, get in with modest leverage or no leverage, depending on your situation, and be in it for the long term. There is so much money in the system that has been put in by the Fed, has been put in by the government, that I think over the next five years,

multiple six-pan cap rates go down, the price of a hotel room will go up. I just, I don't know exactly when, I don't know exactly which assets, by how much, but money is gonna chase assets. And when it does, it going to bid the price of those assets up and I want to own assets. Get assets. Don't put yourself in a position where you've borrowed a lot of money and if I'm wrong by a year you

can't you know service your debt make sure you can easily, and I mean easily service your debt and collect assets and you could collect assets by going on Wall Street or you could collect assets by doing your own deal or Being on a private equity fund or doing somebody else's deal Collect assets to hold. Do you think there's going to go on that? Here's an interesting you get a lot of people You know, there's this battle between greed and fear, right? We're human. It's like the devil on one shoulder and the angel on the other and our life, right? Greed and fear, greed and fear, greed and fear. Okay, so people have this tendency to think, they talk about this especially more in the stock market market but also in real estate

cap rates. We're in a period where greed is winning over fear, right? People have lost their fear. We aren't even close to people losing their fear. How do I know that? We have astronomically all-time high cash holdings by individuals and businesses. You don't have huge cash holdings when greed is rampant, right? Because when greed is rampant, you'd be getting out of cash and into anything, right?

Any and everything. Well, that's not what we see. We see that people are holding all-time records amounts of cash. So we aren't even close to greed really winning. And similarly, banks have staggering amounts of lending capacity. Well, normally, when greed is really winning, banks are lending like math. Well banks aren't lending like man right now. When will asset values really take off? When green takes over. When the belief the trees grow to the sky takes over and it will, right? It will at least temporarily and then it'll swing back. So I think the ride on asset prices is Inevitable and it's going to be large. I

Just don't know exactly what it happens and I just want to have assets when it does Now we've seen the travel industry sort of recover Gradually here. Is there any other industries you see now starting to recover to kind of look into as far as, you know, kind of coming back full circle? Well, industrial properties are already back, right? They only suffered for about two months last year and then really back. And they're being fed by demand exceeding supply because every time a short a shirt is sold through online rather than in a store it takes about three times the amount of warehouse space. And that's caused a short fall. They have wider

aisles, they have assembly space, they have shipping areas, much more than the typical warehouse does to service a brick store. So that is clearly recovered. Multi-family, I think, has pretty fully recovered. That doesn't mean it's not going to perform well. That doesn't mean it's not going to perform well. Retail by and large, at least good retail, fully recovered. Not way ahead of itself, but it's fully recovered. The two sectors that have hospitality, as you say, is moving forward.

The fact that we're opening our borders, I think it's November 1st, to vaccinated foreigners will help, will definitely help, because it won't help demoing so much, right? But it'll help New York City, San Francisco, or Lando, et cetera, a lot. Vegas, I think Vegas is back to about 90% of 2019, but they're not getting much foreign. They're getting some from Mexico, a little from Canada, but we're not allowing

the others in. So as that happens, they'll benefit, a New York will benefit from a travel site. So the international side opening will help. The two sectors that are stumbling, still, for lack of a better phrase, senior care, not so much independent living senior, but senior care, and the problems they are twofold. Do you really want to put your grandmother in a place where two weeks afterwards the place may be shut down and you're not going

to be able to visit your grandmother for a month and so you go all the I don't know I'm going to wait and see why am I going to put her in, just have them shudder away from everybody, right? And so that's in the back of a lot of people's mind, dampening demand. And the other thing is caregivers, the last numbers I saw were like what, 45% to 55% of caregivers are vaccinated. And you know your grandmother is in a vulnerable population and whatever your views are on vaccination I want the people around my grandmother

not to get her sick and you don't know where those people are at night or during the day etc. right and that's dampening the demand in senior. Now I think that will be resolved, but it's going to take a little time. There's still recovery that could happen there. There's some people having debt come due, so there could be some stress. The other is office.

And office, as you know, is either wildly overpriced or wildly underpriced. It's kind of, and what you see in the pricing is kind of the weighted average of those two. It's wildly underpriced if you think by 2024. It's basically like 2019. Mainly you go to the office, everybody's there. Sure, some of the people are working from home,

some are traveling, right, but basically everybody's there in the way it was in 2019. If you believe that, which I do, office is wildly undercriced, wildly. If on the other hand, you say, no, after a year and a half, two years of being online and doing this, people are never going to fully go back to the office. Maybe it goes back to 60% of what it was. That's 60% of largely concentrated in the better buildings, right? Not in the weaker buildings. But with 60 percent it'll never be what it was. If you believe that it's wildly over-priced. It's hard to be in between, right? Because it's either or. And I was just having a conversation with a client today saying, I believe it's wildly underpriced, but in the case of this client, you have to do sharing money. People are not giving you money to speculate, and I wouldn't double

down. We already have some office exposure. I wouldn't double down. If you're a young person with personal, like your grandma died and left you $300,000, I think going and investing in the REITs, the office REITs would be a great play. Because the worst that happens is it never recovers and the 3,000 you got from your grandmother becomes 1,500. And the best thing is it becomes 9,000 or 8,000. And it's your own personal money. So, office is to be determined. I have my own view, but it's to be determined.

Peter, I want to go back and ask you about the housing prices and this potential of it continuing to run. I saw a chart and I think it was somewhere around the 1970, I was saying 1971-ish, where it was comparing housing prices to the average wage, our average salary that we were making. Probably the average income or something. Yeah. It's crazy to see how tiny of an increase we've seen in the average salary or income over the last three, four decades, but yet the housing price.

At what point do they get out of reach for a majority of the population? Or is that even a problem? And are we just going to see a greater gap or disparity between the wealthy and the poor? So in some ways, sometimes economics is right. Economics never said that if you're income went up by 10%, you bought 10% more of everything, right? Never said that.

And it turns out, interestingly, you mentioned 1970, I did my PhD thesis at Chicago in 1976, and one of the things I found was as income goes up, people are going to spend an ever-disproportioned amount trying to upscale their housing. That looks obvious today as you look backwards. It wasn't so obvious then. And that's because it's something people really want. Like university education, right? People have been willing to spend their money on that.

Healthcare. They've really been willing to spend their money on that. So we spend less and less of our money on clothing. Even though we buy more clothes, clothing is very cheap. We spend less and less of our money on technology. Even though we buy more technology, it's gotten really cheap. Offsetting that of these items like house and housing need not go up faster. But if you don't let the supply fully adjust it will. So in Dallas and Houston,

historically, it's not risen that much faster than income, right? It's kind of in Dallas because it's easy to build there. And if you go to California and New York and a lot of other places that make it hard, not impossible, make it hard, guess what? You have a lot of demand, not much supply, price goes up. You add to that that we had a lot of asset inflation. From 2014 to 2019, we had a lot of asset price inflation, including on homes, and I think you hit it, which is what is asset price inflation means? It means if you own the asset, you want asset price inflation.

That's one of the big reasons for nimby's, right? If I own my home, I don't want to make it easy for you to build because my home goes up more in value. So what's happened is you get a 4% increase in your income and you think, yep, inflation was only 2%, I got a 4% increase, I got a 2% real increase. Yep. And then you look in housing prices, what happened by 7%. And then the next year, same thing, you did better inflation on your wages. And yet you're farther behind chasing the house. Who's happy and who's unhappy? The party that's happy is the asset owner, right? And the party that's unhappy is the person who's trying to buy the asset. That tends to be a generational divide, right?

That tends to be people my age, own, and people your age are trying to own. And so it has been a big generational gap. And that will continue. It is also some because of the down payment part. It also relates to family wealth. It used to be that if my income was going up at 4%, and home prices were going up at 3%, I could catch up, right?

I'd accumulate enough. That can't happen with this fundamental underproduction. Now it does happen in Houston, in Dallas, and San Antonio, and I'm not just saying Texas, but you get my point. But in the coastal markets, the high Nimby markets, it's shameful. It's shameful.

So because of that point, I've heard people speculate that Idaho is gonna be the best predictor for us on how the rest of the country is going to pan out because They don't have such rest such restrictions. They're building like crazy I think they also have tons of demands. They have some of the highest demand in the country and They're building faster than all or anywhere in the country. So a lot of people speculate that what we see happen in Idaho as far as the market and pricing will kind of start to predict what we will see everywhere else. Do you subscribe to that? I don't think it will predict what we're going to see elsewhere because elsewhere is not going to allow building to keep up with demand.

I don't think California is going to allow supply to keep up with demand. I don't think California is going to allow supply to keep up with demand. I don't think Santa Barbara, do you really think Santa Barbara is going to allow building to pick up to keep up with what demand would be? No way. No way, right? Forget whether they should or shouldn't. No way. And so I don't think it's a good predictor.

I do think it is a way that we see and bozeman and do what Houston and Dallas have done for a long time, which is, what's the greatest competitive advantage of Dallas and Houston? It's not that they speak Texan. The greatest advantage is that from a cost point of view, housing is affordable. Really affordable. That means as an employer, you don't have to pay outrageous wages to allow your workers

to live well. You don't have to. And that is the secret. And that's why Dallas and Houston have grown a lot faster than have the California places. But it's all about, look, it's purposeful, right? It's non-intentional. It's purposeful. Don't you think I wish, don't wouldn't it be nice if I could pass a regulation that said no one other than me can ever give advice on anything economic. me and will probably increase the amount of iron. Well, that's what's going on in the NINB places, right? That's the same notion.

If you got a home great, if you want a home that hasn't been built, good luck. No. Do you think that they're going to raise interest rates anytime soon or do you think they're going to keep them low for a long time? I think they stay low for a long time and might they raise them? Yeah, they might raise them essentially from zero to almost zero. Right, you have to be. I watched a woman the other day at the gym and I noticed that she was actually peddling

the stationary bike faster. She was going about a mile an hour with no resistance instead of a half a mile an hour with no resistance, instead of a half a mile an hour with no resistance. That's kind of the interest rate scenario on the short side. You know, they might raise it, but it's still effectively nothing. It's still going to be a negative rate relative to inflation. So I think on the short end, you might see a little, The Fed has been a terrible predictor of the Fed. I mean this is not, it's just a factual statement. The Fed has been terrible at predicting

their own interest rates. So you know when they announce after each meeting their dots, and I don't even, I don't even look at them because they've never predicted themselves. If they predicted themselves, that would be interesting. But this is, if they, if they're just random in terms of predicting themselves, why do I care? I did a better job of predicting the fed than the fed did predicting the fed. Now, how is that possible? I mean, it makes you wonder. And it's not that I did such a great job. It's just that tells you how bad they've been.

But I do think you'll see the short go up a little bit. The long if the Fed stops buying bonds in QE, they'll be a bit of a rise in the interest rate, but by any historic standard on the long end, it'll still be quite low. Do you think then it's a good idea to, if you invest in assets like homes to do adjustable rate mortgages, or do you still think it's a good idea to be safe, go 30 year fixed, and... Okay, it's about what your objective is. I, this is a philosophical answer rather than anything else. My view is I got into the asset. Let's just take single family housing. I got into it because I wanted to live there, not because I wanted to speculate on interest rates.

Right? That's secondary. I got into it because it's good school district, nice bathroom, good kitchen. You know, that's why I got into it. Lock that in. Now may you look back and say, oh gee, I could have gotten it cheaper?

Yeah. And by the way, oh gee, I could have gotten a cheaper. Yeah. And by the way, in fact, historically, I don't know, 85% of the time you'd have been better off floating than fixed. It's just that that 15% of the time historically can be quite painful, right? But probably short-term is always not always. Most of the time been financially better, but I didn't get into it for that.

I got into it for its bathrooms and back yard, et cetera. Fix it, you know, just fix it. And the fact that you can prepay just adds to that. Namely, if it gets even cheaper, prepay, and refund. And I feel the same way, by the way, on an apartment bill. And I have an apartment complex where we've made a lot of money in the NOI and caprate sense. Unfortunately, the debt we locked in on exactly the philosophy

I just said, right? The philosophy was we're investing because we like the market, we like the asset, we like what we can do with it, and I don't want to speculate on interest rates, because these are going to be right or wrong on interest rates. So we locked it in for 12 years, and I think we still have six years to go. So it doesn't take a genius to figure out that the prepayment penalty is pretty stunning because it's not prepayable. So it's a fanny product. And we're sitting here where essentially all the profits we

would have made if we sell the property will be eaten up on the prepayment penalty. You know, okay fine. What we'll do is hang on to the property, keep cash running, we're cash flowing very nicely. And you know, just that's not such a bad thing. But I can't monetize the game. I can monetize the cash flow but not the game. And you say, well, gee, don't you wish you'd done floating? Well, sure, if I knew the rates were going down, but I had, you don't know. I mean, you don't know. And so I wanted to make sure I was safe with the asset. That's my general philosophy on debt. Peter, have one last selfish question to ask. Give me three to five of your favorite places to invest in real estate in the country right now

Okay, so they would all They would all be multi-family I think by the way, I'm not going to do the office because that's a very different risk profile. The way I describe it. I prefer to hear single family and multi-family investment. Yeah, so I think they would all be, well, let me put it this way, they'd all be rental. The only reason I would gravitate to to multi-row the single is I can get Freddie and Fanny financing quite effectively. There's a deep market for multi-relative to the borrowing market for single. That's the only

distinction. The demand side is very good for both. The supply side good balance of both. for both the supply side, good balance of both. And I would gravitate, and I'm just going to name places, of come ahead, places like Chattanooga, Huntsville, Alabama. Why? Because I can borrow, basically basically at the same rate and the same amount of debt, LTV, in those markets as I can in the major markets. And I pick up 25 to 50 basis points more yield going in. And if you do the math on that and you're talking about saying,

I'm going to hold it 10 years, that extra cash flow matters a lot, right? Now, if I was going to flip in a year, that extra cash flow for a year doesn't matter much, right? But if you're going to, and that's true whether it's short-term or long-term, right? If you're going to, and that's true whether it's short term or long term, right, if you're going to then hold it though for 10 years, I just think the weight of money is going to push up the value. I don't like the supply demand any different in those kind of markets than the others, but I like the yield. And I like the spread of the yield versus my Freddie Fanny kind of benchmark on multi. And that's the only reason I would prefer

the multi over the single is, I can just get much better Freddie Fanny kind of depth of the financing market and lock in that spread. That's, but I like the single family rental size kind of depth of the financing market and lock in that spread. That's, but I like the single family rental side, as long as you operation we can do it. I like that. Good spread and so forth. It's just not as deep a debt market. Excellent. Well, we appreciate your expertise. This is always a blast talking to you, Peter.

This is great. Thank you very much. very much thanks a lot guys have a great day thank you for listening to mine pump if your goal is to build and shape your body dramatically improve your health and energy and maximize your overall performance check out our discounted RGB Superbundle at mine pump media dot com the RGB Superbundle includes maps and a ballad, maps performance and maps aesthetic. Nine months of phased, expert exercise programming designed by Sal Adam and Justin to systematically transform the way your body looks, feels and performs. With detailed workout blueprints in over 200 videos, the RGB Superbundle is like having Sal Adam and Justin as your own personal trainers, but at a fraction of the price.

The RGB Superbundle has a full 30-day money-back guarantee, and you can get it now plus other valuable free resources at MindPumpMedia.com. If you enjoy this show, please share the love by leaving us a five-star rating and review on iTunes and by introducing Mind Pump to your friends and family. We thank you for your support and until next time, this is Mind Pump!