139 Inflation, Deflation, and Stagnation!
Inflation is when the dollar doesn’t buy as many goods or services because there are more dollars chasing fewer services.
Deflation is when the values of homes continue to go down. Most are due to the credit crisis and there is more supply than there is a demand.
Stagnation is when you have inflation and at the same time, you don’t have income growth.
In this video, Bill and Wendy will talk about Inflation, Deflation, and Stagnation because they know that this where they need to base their decisions and actions on the future.
0:01 – Teaser – “Inflation, Deflation, and Stagnation! What do you think is going to happen in the future? ”
0:27 – Introduction
1:30 – Inflation, Deflation, and Stagnation!
4:31 – What kind of a market do you think we are looking at now?
25:50 – https://www.CarolinaHardMoney.com
Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the “Small Builder” borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and “Ground-up Construction Loans” for investors only in NC, SC, GA, VA, and TN (some areas of FL, as well).
As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.
Bill Fairman (00:01):
Hi folks. I was a little bit tired in our last segment, so I’m going to start calisthenics work me out. So inflation, deflation, or stagnation. That is the question. What do you think is going to happen in the future? We’ll let you know right after.
Wendy Sweet (00:19):
Bill Fairman (00:28):
Imagine the old Batman.
Wendy Sweet (00:29):
It does, pow , crash , bang!
Bill Fairman (00:36):
That’s pretty funny. Thank you so much for joining us on The Passive Wealth Show. I am Bill Fairman. This is Wendy Sweet. Jonathan is not with us this week, but will be back next week.
Wendy Sweet (00:45):
Bill Fairman (00:45):
We are Carolina Capital Management. We are lenders in the Southeast and we specialize in investor only loan. So if you’re interested in borrowing money, go to www.CarolinaHardMoney.com. Click on the bar of notes, not the borrower tab, the apply now tab. If you’re a passive investor looking for passive returns, click on the accredited investor tab, don’t forget the share, like subscribe hit the bell. We also have a comment section. It’s either going to be on the right hand side of your screen or underneath, depending on the platform you’re reviewing us from. And we’ve already asked her Ugly Question earlier in the day and it was about taxes. So we’re going to talk about inflation, deflation or stagnation.
Wendy Sweet (01:34):
Yeah, this is, and this is, I know it’s you know, as soon as I hear the subject, I’ve got this like steel drum that comes down and front of my brain. And I can’t think because this is stuff that’s just.
Bill Fairman (01:45):
Wendy Sweet (01:45):
Bill Fairman (01:45):
Because we want to send her you up. We want to pump you up.
Wendy Sweet (01:51):
I it’s tuff. That’s not really exciting for me, but it’s something we need to really base our moves on of what we plan on doing in the future. And it’s an important discussion to have.
Bill Fairman (02:04):
I will tell you, like I tell a lot of our first time investors in the fund, if you like reading actuarial tables, if not, sorry.
Wendy Sweet (02:16):
Yeah, maybe not. One of the blessings that we get to experience is. We are members of some masterminds that are just so.
Bill Fairman (02:26):
Over the top.
Wendy Sweet (02:26):
Yeah, they really, really are. And they touch on all kinds of subjects and, you know, bring speakers in and raise questions that are that are just at the forefront of what’s going on in the world. And we are really excited. We just got back from freedom founders where you did. I stayed here and took one for the team. But this question about stagnation, deflation and procrastination, what was the other one?
Bill Fairman (02:59):
Deflation or stagnation. So let me start off by giving you definitions. Most of us already know what inflation is. It’s when your dollars don’t go as far, they don’t buy as much goods or services because there’s more dollars chasing fewer services.
Wendy Sweet (03:15):
That’s right. We get to watch gas inflate on a regular basis that’s something we see right?
Bill Fairman (03:20):
And then deflation and I just pointed at 2008, when the values of homes continued to go down.
Wendy Sweet (03:31):
That was not pretty.
Bill Fairman (03:31):
And a lot of it had to do with obviously the credit crisis, but it was also a supply and demand issue. There were way more supply than there was demand. You had a lot of people that own more than one home.
Wendy Sweet (03:46):
Wendy Sweet (03:46):
And most of that was from speculation and go ahead and buy it. Assuming it was going to be worth a certain amount of money, more down the road. They were not investors. They were speculators. And then stagnation is when you have inflation, but at the same time, you don’t have any income growth. So there is no growth in income. So money that people are making are stagnant and at the same time, the cost still goes up. So if you didn’t have, and there’s no same thing with production, if companies aren’t producing as much, yet you still have inflation and then you’ve got stagnation, right. That said, what kind of a market do you think we’re looking at now?
Wendy Sweet (04:35):
All of the above? Is that impossible?
Bill Fairman (04:40):
Actually, that’s not true. Yet. I mean, who knows?
Wendy Sweet (04:45):
I think we’re feeling all of it at some point or another. Like even in the past year, we’ve seen all of that. Right.
Bill Fairman (04:51):
I don’t see anything that other than the short term, last year when oil prices were dropping tremendously.
Wendy Sweet (05:02):
Bill Fairman (05:02):
But that had to do with again world oil prices based on the fact that no one was driving. So it was still a supply and demand.
Wendy Sweet (05:11):
Bill Fairman (05:13):
It wasn’t a devaluation as much as it was there was no market for them.
Wendy Sweet (05:20):
That’s right. We’re all banished to our homes, right?
Bill Fairman (05:25):
But, I think, and by the way, the numbers are showing that incomes are still going and they’re still rising. So I don’t see any deflation or stagnation. I do see inflation going on. And why is this? Because we’re continuously printing.
Wendy Sweet (05:45):
Bill Fairman (05:45):
Wendy Sweet (05:45):
And then giving it away.
Bill Fairman (05:48):
Billion dollars a month in money.
Wendy Sweet (05:53):
That’s a lot of monopoly.
Bill Fairman (05:53):
So let me give you an analogy. Let’s say you own 10 shares of AT&T stock, AT&T decides we’re going to do a two for one stock split. So are you, are you out money? No, because they’re going to give you the 20 shares of stock.
Wendy Sweet (06:15):
Bill Fairman (06:15):
Or you’ll own 20 shares of stock.
Wendy Sweet (06:18):
Bill Fairman (06:18):
And when you used to only have 10.
Wendy Sweet (06:19):
Bill Fairman (06:21):
So you still have as much in your account, but now each share is worth less money.
Wendy Sweet (06:26):
Bill Fairman (06:26):
It’s worth half as much.
Wendy Sweet (06:29):
Wendy Sweet (06:29):
And what has happened right now with lumber prices, steel prices, food prices.
Wendy Sweet (06:36):
Bill Fairman (06:36):
All these things are going up and are we making any more money? Yes. But are we keeping up with inflation? No. and that’s, if you look at the stock market right now, it is on fire. Part of it has to do with what we were talking about earlier in the last show, a lot of people are taking their stimulus money and investing it in the game stock.
Wendy Sweet (07:05):
Bill Fairman (07:05):
So my fear is too many people are speculating with that.
Wendy Sweet (07:12):
Yeah, what’s going to happen then.
Bill Fairman (07:16):
But It’s okay. Because guess what? It was free money.
Wendy Sweet (07:18):
Yeah. It wasn’t free to everybody. The government’s going to have to pay for it at some point, which falls back on us, right?
Wendy Sweet (07:25):
Bill Fairman (07:27):
That said, you know, your traditional investing platforms, you only have two equities or you know, the bond market and the bond market is not paying squat. So where are you going to put your money in growth.
Wendy Sweet (07:47):
Bill Fairman (07:49):
Now you can still buy growth stocks that have that pay a dividend. But you know, if there’s a value start going down, they’re going to have to stop paying dividends too.
Wendy Sweet (08:00):
Well, you know, what I thought was cool about the meeting that you and Jonathan went to with Freedom Founders is they had didn’t have a panel set up for somebody that was supporting or backing deflation, someone who was saying that it would be stagnant. And someone who said that we would see the inflation. Do you remember the points for each of the three?
Bill Fairman (08:26):
Wendy Sweet (08:27):
That slept since then.
Bill Fairman (08:31):
That was the plan. That’s what we did last time, but that’s not how it worked out.
Wendy Sweet (08:38):
Bill Fairman (08:38):
Everybody was saying inflation.
Wendy Sweet (08:39):
Everybody was saying inflation which is interesting, So.
Bill Fairman (08:42):
Usually when we do these panels, no matter how you feel personally.
Wendy Sweet (08:45):
Somebody else’s feeling.
Bill Fairman (08:46):
No, we’re taking a side or not.
Wendy Sweet (08:50):
Bill Fairman (08:50):
So if it’s a lending versus owning, I would be on lending side, but also like owning.
Wendy Sweet (08:56):
Bill Fairman (08:58):
But I’m going to defend the lending side because that’s,
Wendy Sweet (09:00):
That’s what we do.
Bill Fairman (09:00):
That’s that’s not what happened in this case. Basically we had two economists as part of the panel.
Wendy Sweet (09:11):
Really smart people.
Bill Fairman (09:11):
And then two folks that are fund managers that are very well schooled in those areas as well. So Alastair MacDonald was one of the panelists, and he is. I’m going to try and get him on our show. He’s brilliant guy, really funny. He has a great sense of humor. He makes these kind of conversations. Interesting.
Wendy Sweet (09:43):
Bill Fairman (09:43):
To most everyone that’s listening.
Wendy Sweet (09:45):
Bill Fairman (09:46):
He’s from, he’s originally from Zimbabwe. And they had hyperinflation in Zimbabwe when he was living there so much. So that they were, they owned a family ranch there. And you would have to pay for your dinner before you got your food.
Wendy Sweet (10:09):
When your in a restaurant.
Bill Fairman (10:11):
Yeah. Because by the time your meal was over or by the time they handed the meal to you, it would have cost more.
Wendy Sweet (10:18):
That’s crazy. That’s insane.
Bill Fairman (10:19):
They would have to pay their employees twice a day, once before lunch. And once at the end of the day to keep up with the rampant inflation.
Wendy Sweet (10:27):
Wow! that’s insane.
Bill Fairman (10:28):
It was also awful, but we’re not going to see that now we had Loric and I can’t remember his last name, sorry. He was concerned about the Japan, Japan eyes, or the Asian influence on inflation. What they’d been doing for the last 20 years, which is they’ve had almost no growth, 1to 2% growth with you know, interest rates at zero or below. And his argument was, that’s what they’re trying to do to our economy now, we’re going to have such slow growth that it won’t be inflationary because the growth is so small that said, and Sean made a great comment about this was that we’re dealing with two completely different cultures where 70% of the US economy is based on consumption. And we, as Americans are going to be consuming a lot. We’re not giving up on that. We’re going to spend.
Wendy Sweet (11:41):
Bill Fairman (11:43):
And you don’t have the same thing in Japan as you do here, and then different cultures. And, and obviously the economies of scale are so much different as well. You have a lot of countries in Europe that are running into the same issues where their growth is, is really small.
Wendy Sweet (12:00):
Yeah. It’s not just here, it’s globally, that the issue is going on. So, what really begs the question is how do you approach your real estate investing with all of this in mind? What is it that you’re going to put? Brian Maddox has Bitcoin. That’s a whole nother show.
Bill Fairman (12:22):
Yeah. and look, again, that’s speculation. Yes. There’s an infinite amount of these things, but how do you really the price on any of the block chain type monetary.
Wendy Sweet (12:36):
So we were talking about how much you liked that too.
Bill Fairman (12:38):
Well, I loved the block chain.
Wendy Sweet (12:40):
Bill Fairman (12:40):
The technology itself, it’s really going to help with our production, and the real estate.
Wendy Sweet (12:47):
We even got an attorney that accepts funds for closings in Bitcoin, which is kind of nifty.
Bill Fairman (12:56):
The value of these are really based on what people are willing to pay for it.
Wendy Sweet (13:04):
Bill Fairman (13:05):
There’s, there’s nothing, it’s very difficult to base the value. So we’ll see, it’ll have to work out right now. The bottom line is invest in hard assets. I know gold is kind of out of favor but it is still a hard asset. And while inflation happens, the best thing you can do is stick with hard assets, at least. And we already know this from the housing market. It is way out performing or beating inflation right now.
Wendy Sweet (13:43):
Bill Fairman (13:43):
Those things aren’t going to go down in value anytime soon.
Bill Fairman (13:46):
No, but how long will it last?
Bill Fairman (13:48):
Wendy Sweet (13:50):
Yeah. That’s the question.
Bill Fairman (13:51):
It’s a supply and demand thing, and we know right now the demand is much higher than the supply. I said this last week that we had in Charlotte we have like an 18 days supply of available inventory.
Wendy Sweet (14:05):
Bill Fairman (14:05):
I mean, that we were here probably in 2016 and 17 talking about how it’s the lowest we’ve ever seen it. And it was a month and a half.
Wendy Sweet (14:16):
I remember that, I do.
Wendy Sweet (14:20):
Believable. But that said, rates can go up another 2% and there’s still going to be affordable. Why is that? Because you’re talking about 30 and 40 year fixed rate mortgages.
Wendy Sweet (14:39):
Bill Fairman (14:39):
And it may take you out of a certain category of home, but you can still typically qualify for a lower category. And this is why we like to stay in the.
Wendy Sweet (14:48):
Affordable housing market.
Bill Fairman (14:50):
Actually Jake Vanderslice said to me, bill, you should stop saying affordable housing. People start thinking that you’re talking about section eight housing.
Wendy Sweet (15:00):
And that’s not the case.
Bill Fairman (15:01):
And I said, well, I don’t agree because these are owner occupied. Nobody does section 8 on the right direction.
Wendy Sweet (15:07):
Wendy Sweet (15:10):
It doesn’t matter when your dealing with Investors. They’re thinking they’re really low level stuff. So he said, you should call it attainable housing
Wendy Sweet (15:17):
Attainable. What’s another good word,
Bill Fairman (15:20):
Attainable housing. Anyway, my definition of affordable housing is at, or below the median price point for whatever market.
Wendy Sweet (15:28):
That’s a great definition.
Bill Fairman (15:30):
So that keeps it nice and simple. But when you’re in that price point, as far as an investor or a lender here’s the thing. There are people that are always going to be able to afford these things. So if you’re in a much higher bracket, the prices go up and now you can’t afford this one, you can always afford this one. There’s always a place to be able to fill in.
Wendy Sweet (15:57):
That’s exactly right.
Bill Fairman (15:57):
When you’re dealing in the higher value, the more luxury side of things, it’s a little tougher.
Wendy Sweet (16:04):
Right. So when we’re looking at what we really are calling affordable housing, our thought as a lender, and if you’re a lender, you should think this too is. We want to make sure that if we have to take that house back tomorrow, that we can turn around and rent that house and get a good return back on that house. You know, that’s not going to be your 400,000 home is not going to rent for the amount of money that you would need to really pay an investor, a decent return on something like that.
Bill Fairman (16:39):
Yeah, you can get the same your rent, your monthly rentals. Can’t keep up with those values.
Wendy Sweet (16:45):
Bill Fairman (16:45):
But it can all be on the lower bays.
Wendy Sweet (16:47):
Bill Fairman (16:50):
I like to, and again, it depends on what market you’re in. Just take that median price point, whatever market it is and go at, or below that. And you’re in good shape. I wanted to mention, I know you’re a big fan of Tesla since you drive one. So what is.
Wendy Sweet (17:08):
Bill Fairman (17:08):
One of the big hedge fund operators who has been returning somewhere in the neighborhood of 115% above the market to her investors?
Wendy Sweet (17:18):
Bill Fairman (17:20):
Sold $40 million in Tesla stock. And she’s the one that wrote that thing way up. That’s why her investors are doing so well. Anyway, she sold $40 million worth of Tesla stock yesterday in order to purchase the coin. Something, I forget what the name of this is, but it’s a company that helps you trade in those types of currencies and .
Wendy Sweet (17:46):
The Bitcoin types of.
Bill Fairman (17:47):
Yeah. So it’s a trading platform. Their revenue is based on the trade transactions themselves, not the value of the coins. But anyway, I think Tesla.
Wendy Sweet (18:02):
Coin based is what you saying. Yeah.
Bill Fairman (18:02):
Coin based stock. Yeah. Coin based. Good job, thanks for paying attention.
Wendy Sweet (18:10):
We’re glad both of you are watching.
Bill Fairman (18:13):
But again, it, it helped all the other cryptocurrencies actually come up a little bit with this thing going public. That said the only money that, again, that they’re going to make is on the trades there transactions that are made. So where do you find that value we are, and I believe that we are in the ninth inning of a bull market.
Wendy Sweet (18:39):
Your crystal ball must be in better shape than mine.
Bill Fairman (18:41):
I’m just saying every time it gets frothy and people start investing in very volatile areas.
Wendy Sweet (18:50):
Bill Fairman (18:50):
That kinda shows that we’re in the bottom of meetings.
Wendy Sweet (18:57):
Yeah. I mean, we’ve been waiting since 2019 for the poop to hit the fan. And you know, when our lending practices show it, we’ve been extremely conservative on what we’re doing and we’ve watched, you know, our fellow fund to people get a little crazy or not crazy, but different than what we’re investing in a lot more aggressive than what we’re investing in. And, you know, sometimes it works out, sometimes it doesn’t, but I’d rather be on the side of sidecar.
Wendy Sweet (19:29):
And think of this again, we have inflation, which we are going to have, and we already have, you know, the government says we don’t, or we have very little of it. The FED has already pointed to the fact that they’re okay with inflation, they’ll deal with it later.
Wendy Sweet (19:43):
Right, if they can.
Bill Fairman (19:43):
And they’re going to allow it to happen. And they said any inflation is just going to be temporary. Well, we’ll see.
Wendy Sweet (19:53):
It’s all temporary at some point.
Bill Fairman (19:53):
Once the horses left the barn and it’s hard to get them back in there.
Wendy Sweet (19:55):
Bill Fairman (19:55):
That said, you know, your stock market, your equity investing in the stock market is based on cashflow that these companies are producing. But if you have inflation, then the, you have to have more cashflow in order to keep up with the more dollars chasing fewer products and services. So if your, some of your items that you’re having to purchase have doubled in price, that means your portfolio should be twice as high as it should be. Just to keep up.
Wendy Sweet (20:33):
Bill Fairman (20:33):
You’re not really gaining. You’re just trying to stay ahead.
Wendy Sweet (20:38):
Bill Fairman (20:38):
When you’re in real estate, in solid assets, you’re not, yes, you are doing some cashflow, but you’re also dealing in appreciation as well. So you have equities and you have cashflow at the same time.
Wendy Sweet (20:53):
Bill Fairman (20:53):
Everything is based on that solid asset. Your investment in the stock market is only based on the cashflow of that business.
Wendy Sweet (20:59):
Bill Fairman (21:00):
And when, when it goes down, you just lose everything. When you own rental properties and the value of the rental properties goes down, who cares .
Wendy Sweet (21:10):
Bill Fairman (21:10):
The house doesn’t care, what it’s worth. It’s still producing,
Wendy Sweet (21:12):
Whether it’s industrial, commercial, self storage, single family.
Bill Fairman (21:18):
Yep. And You own loans. You’re still getting mortgage payments.
Wendy Sweet (21:22):
Bill Fairman (21:22):
If you don’t, then you own the asset.
Wendy Sweet (21:24):
Bill Fairman (21:25):
And this is why.
Wendy Sweet (21:25):
It’s safe place to be.
Bill Fairman (21:28):
You have a nice cushion between what the value of the property is and what you’re lending on. So it doesn’t mean you’re not ever going to lose money. You’re going to lose money.
Wendy Sweet (21:38):
We promise that.
Bill Fairman (21:39):
You’re just trying to mitigate things that are outside of your control.
Wendy Sweet (21:45):
Bill Fairman (21:45):
And there are going to be things that are outside of your control. I’ll point back to February of 2020, I mean, March.
Wendy Sweet (21:55):
Oh yeah. COVID That’s right. I already forgot. Yeah. We’re we’re moving forward.
Wendy Sweet (21:59):
Bill Fairman (22:01):
So with all these additional retail sales going, can you imagine what it would have been like if California and New York were completely opened up.
Wendy Sweet (22:16):
That’s right. Yeah, because each consumer areas that are still having to hunker down
Bill Fairman (22:24):
A quick story to tell you, I know we only have five minutes. I was on the phone with a potential investor and he lives in New York city. He asked me, I’m sorry, there’s somebody at the door. Can I get you to hold for just a moment? My wife was in the back, can’t get to the door, I hear some voices. Then he comes back to the phone and says, I apologize. And that was the city of New York checking to make sure I was still in the house, his wife. And he went on vacation and left the state. And they were under a 14 day.
Wendy Sweet (22:57):
Bill Fairman (22:59):
Because they left the state and it was the 10th day. And they came by to check to make sure they were still there. And I said, why didn’t you just drive to New Jersey and fly out of there Instead of flying out of a New York airport.
Wendy Sweet (23:15):
That’s just insane that they spent money and dollars to check up on people and make sure they’re home. That’s really important.
Bill Fairman (23:22):
Wendy Sweet (23:25):
So there’s our discount for QuestCon that starts tomorrow.
Bill Fairman (23:29):
Last chance it starts tomorrow.
Wendy Sweet (23:31):
Bill Fairman (23:32):
Actually I think it starts Thursday night actually tonight.
Wendy Sweet (23:36):
Yeah, that’s right. That’s exactly right. Listen, if you want to raise money or if you want to lend money or even learn a little bit more about self-directed money, you really need to check this out. There’s a lot of smart people that are going to be on this. Jeff Watson, John Hyer, Eddie Gant. Did I see Eddie Wilson on there too? Yeah. Eddie Speed is on there if there’s just going to be a lot.
Bill Fairman (24:09):
There’s gonna be three Eddie’s.
Wendy Sweet (24:09):
Bill Fairman (24:10):
It have too many Eddie’s.
Wendy Sweet (24:10):
It’s a popular name. So there’s just a lot of really strong, strong people gonna be there.
Bill Fairman (24:18):
By the way if you’re a solo Entrepreneur. There’s something called the solo 401k, and it is the best thing since sliced bread. And if you’re at the age of 50 or above 50, you can put as much as $60,000 a year in your 401k.
Wendy Sweet (24:33):
And if you want to know more about it, join me on Sonrises tomorrow. You can go to the Sonriser’s Facebook page to get the link for our Sonriser Zoom meeting at 7:30 AM.
Bill Fairman (24:47):
And it’s S O N not S U N.
Wendy Sweet (24:48):
Yes, S O N R I S E with an S on the end of that. So it Sonrises Facebook page, you will be able to join us in the morning. We’re going to be talking with Derek Long, who is from Quest and he’s gonna, he’s not going to do an overall information kind of thing about IRS. He’s gonna get into it, getting into the questions. Yeah. So that’s, that’s tomorrow. We’d love to have you for that.
Bill Fairman (25:17):
Excellent. And he’s doing this, even though they have QuestCon going on.
Wendy Sweet (25:21):
Bill Fairman (25:21):
Starting at nine o’clock.
Wendy Sweet (25:23):
Wendy Sweet (25:24):
Or maybe 9:30.
Wendy Sweet (25:25):
That’s right and it’s great that he’s doing that with us.
Wendy Sweet (25:28):
So thank you guys for joining us. If you have any other questions or any questions at all add it the comment side somebody will be watching it. And if you have any questions after the show, we’ll be able to answer it for you.
Wendy Sweet (25:41):
Bill Fairman (25:41):
We are Carolina Capital Management. We are lenders in the Southeast. We specialize in investment loans for investors only. And if you’re a borrower click on www.CarolinaHardMoney.com go to the apply now tab, if you’re a passive investor, looking for passive returns, click on the accredited investor tab, don’t forget to like share, subscribe, hit the bell and get ready for next week’s show. I have no idea what we’re doing, but we will be here. Well, Wendy might not.
Wendy Sweet (26:15):
I’ll be here. I’ll just be at the beach.
Bill Fairman (26:17):
You might be vacationing a little bit with.
Wendy Sweet (26:19):
With the girls, And thanks for the comment, Jim Ingersoll.
Bill Fairman (26:24):
Oh, Hey Jim. Hope you’re doing well. All right, guys, y’all take care. We’ll talk to you next week. Thank you so much for watching us on The Passive Wealth Show.
Wendy Sweet (26:36):
Tell your friends.