The Feds Evil Plan for Housing and Economy

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good morning good afternoon good evening

folks Michael Zuber one rental at a time

back with the one and only Mr Jonathan

twanley how you doing sir I’m doing

great Michael how are you I’m doing well

uh we’re gonna do a quick pivot on topic

number three take take a topic you and I

were doing off air and actually just put

it out there let people respond and this

is about really what’s going on at the

FED right the FED is causing some pain

they told us it was coming at Jackson

Hole congratulations they’re delivering

on what they said uh but I do think

there might be a bigger Mission a bigger

thing that Jerome Powell and his cronies

are doing so I thought maybe we should

talk about it we may or may not agree

which is awesome uh so what what do you

see what do you see is there is there a

bigger theme that he’s going after well

first of all I want to say

congratulations to Jerome Powell for

being a politician who delivers on his

promises he said pain is coming and he

was right so he didn’t lie that’s right

he got delivered so uh kudos to him for

that um he really came through on his

promise right that’s funny

but uh on a more serious note I mean I I

I personally think uh and this is just

my own personal view right it’s not you

know you can dispute it you can say I’m

full of it probably would probably be

right um but I I I think that uh that

the the there has been a

a group within the FED uh that has long

objected to the easy money policy and

they went along with it because uh you

know they try to put on a common front

um and uh you know maybe in the short

term they thought that it was necessary

but they’re they’re bias they’re kind of

professional uh you know education tells

them that these low interest rates for

as long as we’ve had them are bad for

the economy they create a lot of

problems you know the you can trace a

lot of the inequality that we have now

to uh to interest rates you can you can

trace the the run-up in the cost of

housing to artificially lower interest

rates uh and uh that’s caused a lot of

pain it’s benefited a small number of

people and it’s caused a lot of pain to

most Americans and I think that that

that Powell and other people on the FED

uh realize that they need to get

interest rates back to a more historic


uh you know and and of course then

there’s always the issue of like what

happens if you have a real recession you

have to drop and you got to have some

place to go right to juice the economy a

bit you got to have some cushion there

um but I think that the larger thing is

that that um

they need interest rates to get back to

something like normal uh and I think

Powell has even sort of hinted at this

saying like the cost of housing is too

high they need to kind of break break

the back of the the housing bubble the

long-term housing bubble right so I

think that but politically it’s been

very difficult for them to raise

interest rates you know partly because

under the the previous couple of fed

chairman they let it go on too long the

markets became addicted to low interest

rates and when they tried to raise in

2018 2019 when they thought that hey the

economy is strong enough to absorb it

which frankly it was but Wall Street

through a hissy fit right and the FED

got scared and they backed off and they

lowered interest you know they went back

to lowering at that point I think now

they see their opportunity with

inflation now they have political cover

because people are screaming about

inflation and that that is drowning out

Wall Street right because people

you know what no one really cares about

wall Street’s profits being down when

like everybody is paying five bucks a

gallon or six bucks a gallon for gas

right so the FED realizes that they’ve

got a chance now to under the guise or

under the you know the

the yeah I know the guys of breaking the

back of inflation yeah right they’ve got

the cover to go and like do something

dramatic with interest rates and cause

pain to like the people who would

otherwise you know have them by the

throat and and be able to prevent them

from from doing what what needs to be

done so that that’s what I think is

going on here but I don’t know how you

see it yeah it’s kind of similar but

different I think I think one of the

things that Powell wants to get rid of

is what Wall Street Calls the fed put


uh I I think you know he’s an

intellectual I believe he’s an attorney

by training I believe or a lawyer and I

think he looks at again using inflation

like you say as the cover

he wants he wants to kind of break the

connection that when Wall Street throws

a hissy fit the FED bails him out and I

actually I mean you know there was a

billionaire on CNBC yesterday Barry

I’m gonna mess up his last name Chardon

halt or something like that

yeah that guy that guy yeah basically uh

you know Capital Partners or whatever

he’s the he’s the CEO of and he’s out

there complaining you know the economy

is going to crumble and blah blah blah

blah and I’m like I don’t know who this

guy is let me look him up and sure

enough he’s a multi-family you know real

estate guy around the world I’m like

well no wonder you’re complaining the

fed’s coming after your business right

you may have variable rate debt you may

have bad assumptions you may be in

Warren Buffett speak swimming naked and

don’t have the right debt I’m not saying

he does I’m just saying maybe you’re

uncomfortable because you know the FED

is is you know taking away the punch

bowl and and you know maybe you have

there’s a lot of people that got

addicted to bad debt they got less

disciplined they did lots of

things that work in a low rate

environment that don’t work in a normal

let alone a high rate environment so

yeah so for me I think I think I think

Powell is trying to

uh get the FED back to volcker Worlds

not volcker rates but vocal world where

the Fed was independent it wasn’t

perceived as political uh influence

because again Volker stood up to Reagan

Reagan begged him uh to lower rates and

he didn’t uh my suspicion is uh if it

hasn’t happened already it’s about to

get really loud uh for people you know

beating on Powell and I don’t think he’s

gonna I think he’s I think Powell knows

that if he’s not already he’s soon to be

the most hated man in America

because of what he’s doing all right

unemployment’s going to go up pain is

coming stocks are going down pain is

coming uh you know all assets you know

are being popped and I think I think

he’s I think he’s got a pretty good

backbone again I could be wrong

um but yeah I think he’s trying to get

rid of the fed put if you were to ask me

what’s the main thing yeah I mean I

think that that makes a lot of sense and

if you look at sort of the the negative

effect of you know low interest rates

like we’ve talked about before us it’s

like you know

it’s like giving people like

amphetamines or something right I mean

it’s just it’s giving us it’s giving a

small set of people amphetamines and and

the rest of us pay for it yeah yeah and

and and it’s it has really caused

misallocation of capital exactly exactly

the money has gone into bad stuff so

it’s gone into stock BuyBacks it’s gone

into uh you know non-productive stupid

Investments you know uh and when you

have a risk-free return that you have to

beat right that’s four or five percent

like what you used to be able to get on

a t-bill it makes people think about

where they’re going to invest money it

makes people it forces people to make

better decisions when you’ve got

essentially free money then it doesn’t

really matter like we’ll just throw

money at everything and hope some of it

sticks right and then one a couple

things stick then they call themselves

Geniuses right but and you see you see

you know it leads to speculation and

everything it’s responsible for stuff

like you know cryptocurrency right I

mean crypto has a time and a place and

blockchain is a real thing and all sorts

of stuff but like Bitcoin at sixty

thousand dollars is all this crazy stuff

like it’s going to be a million dollars

like that it was driven entirely by the

fact that people could not get yield by

just buying a t-bill right they could

not and they couldn’t find assets to buy

Like Houses because they couldn’t afford

them all the traditional ways that

people would save money for the future

were taken away from them because low

interest rates essentially you know made

it easy you know for the people who

already had an easy time getting money

it just made it easier for them and it’s

basically screwed everybody else right

so uh and I think that you know maybe

I’m sort of reading too much into

Powell but like I agree with you I think

that there’s the idea that we need to


we’ve had too much misallocation of okay

too many bad Investments too many too

much good money following bad money and

that we have to get back there needs to

be some you know Baseline against which

you compare compare all Investments that

is higher than zero right yeah so if we

if we play this out right because

everybody and their brother is talking

about a Fed pivot now right they’re all

begging for because again there’s real

pain going out that people have had

misallocation people have interest you

know variable interest rate There’s real

pain going out there a lot of it’s kind

of bubbling below the surface I think

it’s coming out


so we obviously have two more fed

meetings I think we get a 75 uh November

1st or November 2nd I think we at least

we get a 50 which will take us I think

to four and a quarter

right we’re three yeah it’ll take us

four and a quarter four and a half we

might get 75.75

um Bostic fed president Bostic just

talked about hey let’s get to four and a

half by the end of the year and then


uh again Wall Street as you know is Ford

looking that you know that’s two months

away you know that could that could get

Wall Street excited again because of

course what Wall Street is going to

guess is hey a pause then a cut I don’t

think a Cut’s coming

good investors they don’t need to know

they don’t need cheap money they just

need to know what the Horizon looks like

correct yes exactly so so and I think

it’s funny I was asked a question last

night on my coaching my monthly coaching

call uh about uh when do I think defend

is going to lower rates again and like

when when does uh you know and people

talking about oh you know that that it’s

18 months between no last fed rise and

the first

and it would it didn’t think about it

last night but it just it just made me

think right now that there’s like an

entire generation of investors that

basically doesn’t know how to invest

except with cheap money right yeah 15

years basically yeah and the thing is

like it doesn’t it actually doesn’t

matter what the interest rate is right

the interest rate is actually relevant

except if you Buy in a low interest rate

environment and need to sell in a high

interest rate environment that’s bad

right and the opposite is really great

if you’re able to pull off the opposite

but what is the best for everybody is a

stable interest rate environment over

the long term where you’re not gaining

interest rates all the time right I mean

you know there’s going to be some

fluctuation that’s normal but yeah at

the margin not not standard deviation

moves yeah but you’re not yeah you’re

not talking about these massive moves

that are essentially created by like too

much cheap money for too long a period

of time right and so but so many people

have have kind of internalized this idea

that the only way to make money in real

estate is with super cheap interest

rates and all and appreciation only

right you know that that they don’t they

don’t understand it like you can make

plenty of money in a you know in a

normal interest rate environment because

what’s going to happen prices will

adjust to reflect the reality right so

and you just have to if as long as you

do your underwriting correctly right and

don’t overpay for stuff right you’ll

you’ll do fine right but I think I agree

but we’re gonna it transitional period

right now and those are always painful

right and for people who who know

nothing but cheap you know if you’re 35

years old right you have never invested

in an environment other than a low

interest rate environment you don’t you

have no memory of like like treasury

bills being a normal part of your

Investment Portfolio because they were

stable you can count on them and they

were going to pay you five six percent

interest right

they only understand like the

speculative environment that’s you know

created by super low interest rates and

I for one would like to see that

environment and I know it’s going to be

painful but I would like to go back to

something you know resembling more of a

you know hard money and and more sound

money and yeah interest rates yeah yeah

and again I think I think I think Powell

you know would obviously never say that

out loud but I think that’s what he

means my pain is coming he understands

that over the last couple of years years

um not there’s been there’s been

misallocation of money for a long time

stock BuyBacks being a great example of

it uh but there’s been it got hyper in

the last two years and you know there’s

lots of little train wrecks there’s some


you know there’s a lot of car wrecks

there’s some train wrecks or some

there’s just some bad stuff that we have

to get through and again where that

happens there’s opportunity right if

you’re prepared if you’re educated uh

there’s gonna be some great deals uh

coming so I’m excited yeah and look I

mean you and I have talked before about

you know the problem with the FED in the

past has been they’ve tried at all costs

to avoid recessions right and recessions

are you know and part of the business

cycle we’ve made the analogy that like

you know it’s like the same as with

forestry right if you oh yeah if you let

the small wildfires burn right they burn

up they clear out the underbrush and

they they basically make the big

wildfires impossible right and the same

thing with recessions like if you have

the small business cycle recession it

cuts out some of the Dead weight right

it forces the the business the marginal

businesses to fail and release the

resources for better use elsewhere right

but what happens if you don’t have that

that that brush that undergrowth just

gets bigger and bigger and bigger and

then when you got a spark it a lightning

strike then you have a conflagration

right and so and and now we’re seeing

the conflagration we saw one in 2006

2007 2008 and then the FED went and just

repeated its mistake again right and

we’re seeing it again now because the

FED could not allow the business cycle

to function normally right so hopefully

you know what we’ll see now and you know

this maybe there’s a lot of things you

know that are kind of happening all at

once sort of like reassuring less less

dependency on China like all this stuff

is actually going to make life more

expensive for Americans however

like it might also make them better for

oh I think so I think I think yeah

reassure I mean all of this stuff uh

again I go back to the 70s I think we

could have a a you know five-year period

where inflation is above Trend hopefully

it’s not eight or nine percent uh

because again restoring manufacturing

it’s just it’s like Micron just dropped

100 billion in New York you know it’s

just all of this still going on which is

net positive long term right but will be

inflationary in this in the short term

and um yeah I hope I hope Powell gets

rid of the fed put uh I I really hate

that Wall Street uh has learned that

they could grab the fed by the throat

whine and cry like a little baby tantrum

and the FED will pivot

um I hope it I hope it doesn’t happen I

hope he has a backbone I hope I hope he

delivers so Jonathan this has been a lot

of fun where can people find you

yeah so I’ve already pushed my uh

checklist which you can go back to the

other episodes and and uh check out if

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continue the conversation there yep I

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part of it folks also if you do join let

me know you came from one rental at a

time so he knows uh that his time here

every week is valuable thanks Jonathan

thanks so much

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