Speaker 1: Welcome to another episode of the Chicks on the Right
Speaker 1: podcast where we talk to our friend and sponsor of
Speaker 1: the show, Zach Abraham from Bulwark Capital Management. And according
Speaker 1: to an article in Finance, Yahoo's Finance section, Trump has
Speaker 1: been pushing this new bill in Congress to make housing
Speaker 1: more affordable by increasing the amount of it being available,
Speaker 1: increasing supply, cutting a bunch of bureaucracy, which is always
Speaker 1: a good thing, lowering costs for manufactured homes, and then
Speaker 1: cracking down on big giant corporate investors from buying up
Speaker 1: a whole bunch of them, which we know has been
Speaker 1: a huge problem. That is a huge So for an
Speaker 1: average family hoping to buy a home, right now, what
Speaker 1: do you think a bill like this, if it passes,
Speaker 1: would actually change for them?
Speaker 2: Well, great question, so I will use I have been preoccupied.
Speaker 2: My political life has been turned upside down a little
Speaker 2: bit because I have always been nationally focused, right, it's
Speaker 2: my job internationally focused. And I've gotten much more involved
Speaker 2: in state politics because of the insanity that's happening in
Speaker 2: Washington State, right, which which got me targeted by the government,
Speaker 2: which has been fun. But what we have looked at
Speaker 2: in here and I've talked to I've talked to contractors
Speaker 2: about this, and don't hold me to it, but it's
Speaker 2: it's close currently in the state of Washington to build
Speaker 2: a home. When you look at the cost of building
Speaker 2: a home, somewhere between one hundred and forty thousand to
Speaker 2: one hundred and seventy thousand dollars of cost to build
Speaker 2: that home is purely permitting in loops you've got to
Speaker 2: jump through business. My gosh, one hundred and forty to
Speaker 2: one hundred and seventy thousand dollars per home. So our
Speaker 2: governor puts out a tweet the other day where he goes,
Speaker 2: we've got to attack the home affordability crisis and we're
Speaker 2: going to do this and we're going to do that.
Speaker 2: And I I just sat back and I went, okay,
Speaker 2: so here and look, this is just for a guy
Speaker 2: that studied finance and economics in college, this is really
Speaker 2: really simple. Okay. There can be all kinds of different
Speaker 2: ways to do things, so we're gonna have different benefits
Speaker 2: and we're gonna have different costs. The one benefit that
Speaker 2: anybody in economics wouldn't argue that capitalism delivers and that
Speaker 2: free markets deliver is the lowest cost of production. Okay,
Speaker 2: And it's just the way that free markets work, meaning
Speaker 2: the bid goes to or the group that wins is
Speaker 2: the one typically that is the lowest bidder. Right. And
Speaker 2: they're able to be the lowest bidder and still make
Speaker 2: money because they govern themselves, right, they're making sure that
Speaker 2: they're controlling costs on their levels. When government steps into anything.
Speaker 2: And this isn't a political ideological statement, it's not, it's
Speaker 2: just factual. The minute government steps into a situation, they're
Speaker 2: making decisions for a whole lot of reasons, a lot
Speaker 2: of which have nothing to do with the cost of production.
Speaker 2: And it's why whenever government says we're going to get
Speaker 2: involved in something and lower the cost, that never happens.
Speaker 2: Not because and here's where here's where that argument goes
Speaker 2: off the rails. Not because they're incompetent, not because they're evil.
Speaker 2: Some of the mom are, yeah, but it's just government.
Speaker 2: Meaning when you're running a business and you're building homes,
Speaker 2: your singular number one focus is build that home as
Speaker 2: safely and as efficiently and as profitably as possible. Right,
Speaker 2: And your business and your children and your wife and
Speaker 2: your mortgage rely on your ability to do that when
Speaker 2: you're a government bureaucrat trying to fix a home affordability crisis.
Speaker 2: Your paycheck isn't the online Your kids aren't you know
Speaker 2: what I mean? Feeding your family isn't ter rich. Do
Speaker 2: you think they're going to have the same urgency and
Speaker 2: the same of course not. That goes with everything.
Speaker 3: That's how they feel about everything, basically.
Speaker 2: So if you want to lower the cost of anything,
Speaker 2: just and this is where it gets so frustrating with
Speaker 2: this mod these modern liberals, is you look at them
Speaker 2: and go listen. I don't disagree with you, but if
Speaker 2: you want to do the thing you say you want
Speaker 2: to do, that isn't the way to do it right,
Speaker 2: because we'd all universally agree we want to bring down
Speaker 2: home prices. Listen to them talk that we got to
Speaker 2: We had another one. I don't know if you guys,
Speaker 2: Promella primel Giapalas or not. Yes, another treat from the
Speaker 2: Pacific Northwest courtesy, Thank you very much. But she gets
Speaker 2: on there same thing. We've got to stop picking developers
Speaker 2: over people. That's what she boiled down the lack of
Speaker 2: affordable housing as we've picked developers over people and I go.
Speaker 2: You know what developers like to do. They like to
Speaker 2: sell things to people. It's kind of how they make money. Right,
Speaker 2: So the fact that there are no homes to buy
Speaker 2: and nobody's buying them and there are no transactions, we're
Speaker 2: going to chalk that up to picking developers over people.
Speaker 3: Yeah, well it doesn't even make any offense. But how
Speaker 3: do you But but how do you feel about like
Speaker 3: the people, like the big investors that are coming in
Speaker 3: Because you know, Mack and I a couple of years
Speaker 3: ago in Texas, even we stayed in Irving. Do you
Speaker 3: remember when we stayed in Irving and we were at
Speaker 3: that Airbnb and they were like swaths of houses that
Speaker 3: in this neighborhood, really nice, upscale neighborhood. They were not
Speaker 3: owned by single families. They were owned by these like
Speaker 3: these guys or investors that came in and just bought
Speaker 3: like blocks of houses and then they runed them out
Speaker 3: as Airbnbs. So like, if if the government comes in
Speaker 3: and says you can't do that anymore, will that help
Speaker 3: or does it even matter?
Speaker 2: Well it does, does that make a dent? Yeah, it's
Speaker 2: it's hard to it's hard to predict because you know,
Speaker 2: I hate this sound like the cliche guy, but real
Speaker 2: estate is so local. It's really going to depend on
Speaker 2: where you're at. I personally have always thought that I
Speaker 2: wouldn't have a problem if if, if the law was
Speaker 2: put together that restricted the ability for corporations to do
Speaker 2: that to some degree. The flip side is, though, is
Speaker 2: that more housing's more housing, right, Like, at the end
Speaker 2: of the day, the more houses we have, the laws
Speaker 2: of supply and demand have not been muted. If we
Speaker 2: have more housing, generally speaking, the cost of housing will
Speaker 2: go down, right.
Speaker 3: Yeah.
Speaker 2: So what I would say is I would and I'd
Speaker 2: have to look into this. This is just me kind
Speaker 2: of shooting from the hip here. I would sit there
Speaker 2: and say, I have no problem if corporations own large
Speaker 2: swaths of retail homes, assuming they built them. Does that
Speaker 2: make sense? Yeah, but it'll buying up.
Speaker 1: I'm just curious too, like, because you hear a lot
Speaker 1: about these corporations buying up like second homes or homes
Speaker 1: that people did use for airbnbs. So is there a
Speaker 1: downside to them not having those, you know what I mean?
Speaker 1: Like if they just sit on the market forever, nobody
Speaker 1: wants them. It feels like it would be better for
Speaker 1: somebody to own it.
Speaker 3: But I don't know.
Speaker 1: I can't tell like I can't I don't know enough
Speaker 1: about real estate to know. Is this a great idea
Speaker 1: to completely eliminate them from being able to own them
Speaker 1: at all? Or does this actually solve a lot of problems.
Speaker 2: Look, that's a great question, Okay, So let me answer
Speaker 2: it this way. At the end of the day, when
Speaker 2: we're talking about making things less expensive, the number one
Speaker 2: word that should pop up in our head is efficient. Right.
Speaker 2: The more efficient something is, the cheaper it will be.
Speaker 2: What I do know, generally speaking, is looking at laws
Speaker 2: that prohibits this person from buying it, prohibits this person
Speaker 2: from buying it, all that kind of stuff. Those things
Speaker 2: can work on the margin. If we are serious about
Speaker 2: lowering the cost of real estate in this country, the
Speaker 2: number one thing we will do is drastically cut using
Speaker 2: technology that we have times it takes to get permits,
Speaker 2: drastically cut the cost. And like I've always said, you were, well,
Speaker 2: if we cut those regulations. No, those regulations are dumb.
Speaker 2: All they do is slow things down and make them
Speaker 2: more expensive. Cut the regulations, increase the penalties. Right, Well,
Speaker 2: we're the cost to do business, increase the penalty if
Speaker 2: you do it wrong or if you you know, if
Speaker 2: you're cut into a cut, you know cut and for
Speaker 2: people that have not dealt with government like this and
Speaker 2: and seen how ridiculous it is and the money waste,
Speaker 2: and you know, the different subject. But I'll give you
Speaker 2: a class. Another example. Good friend of ours works for
Speaker 2: the state and and was telling us this story. And
Speaker 2: they're not like a they're not a super political person,
Speaker 2: so this was not a political critique coming from them.
Speaker 2: It was just a competent secretique. In the state of Washington,
Speaker 2: we bought this uh data center. We were not data
Speaker 2: center program, a software system to manage our data, okay,
Speaker 2: And we bought it and we started the implementation process
Speaker 2: and you do the initial purchase and then you got
Speaker 2: to pay subscription fees, right like you know, licensing fees
Speaker 2: what they call it. You're gonna have four hundred users,
Speaker 2: so we're gonna give you four hundred logins. Each user
Speaker 2: is gonna cost you this much month. Okay. We purchased
Speaker 2: that software twelve years ago. It still is not implemented,
Speaker 2: and we've been paying the licensing fees for twelve.
Speaker 1: Oh my gosh right, it's ridiculous.
Speaker 2: And so then they then these people are telling you
Speaker 2: that we're going to pass laws that they write, I'm
Speaker 2: going to lower the cost of housing. Right, So people
Speaker 2: won't like this answer. But if we look at the
Speaker 2: cost of housing, you can look at the cost of
Speaker 2: housing right now, and I can. I will tell you that,
Speaker 2: I bet you the national average if the government just
Speaker 2: stayed well enough alone, the national average would be somewhere
Speaker 2: lower by about twenty five to thirty percent. Because part
Speaker 2: of of what part of what his kept housing price
Speaker 2: is high is the stock market. Meaning we decided after
Speaker 2: two thousand and eight, two thousand and nine that regardless
Speaker 2: of the cost, regardless of how much debt it piled
Speaker 2: onto us, we weren't going to tolerate recessions anymore. And
Speaker 2: when the economy slows down, we're going to give people money.
Speaker 2: And we're well, now you have. Isn't it weird? Nobody
Speaker 2: sits there and asks this question. You started doing all
Speaker 2: those games fifteen years ago, and here we are with
Speaker 2: the most unaffordable housing situation in history of the rest
Speaker 2: Is there any correlation there? I would think, so right,
Speaker 2: and so like, And this is what I've talked about
Speaker 2: if you're sixty five years old and ninety percent of
Speaker 2: your retirement savings is in an account that is rising
Speaker 2: with the SMP five hundred, this has been great for you. Okay,
Speaker 2: If you're twenty eight to thirty years old and you
Speaker 2: want to buy a house, it's been it's been atrocious.
Speaker 2: You've got a record amount of student loans on your
Speaker 2: now a student loans right, student debts, and on top
Speaker 2: of it, you're looking at record and affordability and housing prices.
Speaker 2: Both of those things could not have existed without, in
Speaker 2: my opinion, the reckless and short sighted monetary policy we've
Speaker 2: had since two thousand and eight two thousand and nine,
Speaker 2: artificially low interest rates that were suppressed pushing home prices up.
Speaker 2: And we were saying it for years. Right, if you
Speaker 2: keep doing this, eventually you're going to get the inflation
Speaker 2: that you say you want, and here it. Yeah. And
Speaker 2: the problem with inflation is it can be stubborn to
Speaker 2: get started, but once it started, it's like a grease fire.
Speaker 2: You can't put it out. And we're seeing it right now.
Speaker 2: If we go a year, if we went twelve months
Speaker 2: ago and said, hey, where do you guys, think inflation
Speaker 2: measured by PPI, so price producers index, what do you
Speaker 2: where do you think that would be? Nobody would have
Speaker 2: predicted six percent. We just printed six percent last week.
Speaker 2: And if you want to know what that means, like
Speaker 2: PPI leads into CPI. So right where you first see
Speaker 2: inflation is what the producers, the people that are actually
Speaker 2: making the good you see it first they start paying
Speaker 2: that higher cost, so their costs start rising, and then
Speaker 2: it get passes through to the consumers. So you're seeing
Speaker 2: another ripper here at inflation. I think you're going to
Speaker 2: see a lot more. But all of these things, the
Speaker 2: chickens are coming home to roost. Right. We've been living
Speaker 2: on a credit card for the last fifteen years. I
Speaker 2: get and we're paying. And the only way to really
Speaker 2: effectively combat that cost increase is you just have to
Speaker 2: get government out of the way.
Speaker 1: And these are the You always give us the hard truths,
Speaker 1: and I appreciate and also dislike you very much for it.
Speaker 2: You know what's funny, I feel similarly. I feel similarly.
Speaker 1: I waited, like every time we talk, I'm just like.
Speaker 2: Man, I missed the eighties. It's the thing I missed
Speaker 2: the eighties right now is what I do it. Man,
Speaker 2: It's it's a you know, I think we all know it,
Speaker 2: but it's a really tough time, right Like, it's a
Speaker 2: tough time politically, you know again looking at Washington State,
Speaker 2: we're kind of ground zero for that right now. And
Speaker 2: it's it's a tough time because there's such a there's
Speaker 2: such a cacophony of right noise and you know, social
Speaker 2: media and all this kind of stuff. And I think
Speaker 2: it's really helps where you get back down to basics
Speaker 2: and you go, Okay, what are the basics here? Right?
Speaker 2: How do we really make costco down? Get government out
Speaker 2: of the way. Yeah, I mean I know that.
Speaker 1: It's I know we don't like to hear it, but
Speaker 1: we need to hear it, and people need to hear
Speaker 1: it because they need to know how to plan better
Speaker 1: for their own financial portfolios. And this is why we
Speaker 1: always point them in your direction, because you're the expert.
Speaker 1: So how can people hear you on your own show,
Speaker 1: get into your webinars and maybe get a second opinion
Speaker 1: about their own retirement from you?
Speaker 2: Yeah? No, yes, I appreciate that. Another great hand off there.
Speaker 2: That's always she is, man, She's like an NFL quarterback,
Speaker 2: you know audish in handing off always a point guard
Speaker 2: if you will, right, yeah, yeah, So we do a
Speaker 2: daily show where we try to in thirty to forty minutes,
Speaker 2: summarize everything important to happen that day in economics, finance,
Speaker 2: and global politics. It's called Know Your Risk Podcast. You
Speaker 2: can just search that on YouTube. And then we got
Speaker 2: our our Energy the Impact of Energy webinar coming up.
Speaker 2: I believe it is this Thursday. Makes this Thursday? Is
Speaker 2: this Thursday? Yeah, three thirty and that's free of charge.
Speaker 2: Just go to Borgercapitalmanagement dot com and we explain to
Speaker 2: you a the impacts that energy you're going to have
Speaker 2: on you, especially over the next year and in your portfolio.
Speaker 2: And then we summarize what we do, how we do it.
Speaker 2: You know, we're active managers, very different than most firms,
Speaker 2: and so by the time you know forty five minute
Speaker 2: to fifty minute presentation, you'll know who we are, how
Speaker 2: we do it, and what we do. And if you
Speaker 2: want to talk to us, great, none if it costs
Speaker 2: you any money, We're not going to call you on Saturdays. Right,
Speaker 2: We're looking for partners. But yeah, so you go to
Speaker 2: our website Borercapital Management dot Com. Dialogue box will pop up.
Speaker 2: You can sign up for the free webinar coming up
Speaker 2: this Thursday. Thank you, Zach. All right, thank you ladies.
Speaker 2: Some advisory services offered through Track financialc and SEC Registered
Speaker 2: Investment Advisor. The opinions expressed in this programmer for general
Speaker 2: informational purposes only, and are not intended to provide specific
Speaker 2: advice or recommendations for any individual or on any specific security.
Speaker 2: Any references to performance of security so are thought to
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