[music playing] You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts, all the central banks going nuts. So it's all acting like safe heathen. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. And the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the vote case for Bitcoin. If you're not paying attention, you probably should be. You probably should be. All right, take two, Melody. Welcome back to the show. Thank you so much. Thank you for having me. It's my pleasure to be here. Well, like I said, it's timely talking to you as somebody settling on a house next week. It may not be the best market to do, but I can get my forever house. And for anybody who didn't catch the first interview with Melody in Q3, beginning Q4, last year, this little background, Melody's a housing market analyst and independent researcher. She's based in Tennessee. She runs the M3_Melody substack, which is great. I highly recommend subscribing to it if you want to stay up to date on this. She's doing deep dive analysis on housing data labor markets in the intersection of government policy but real estate, former mortgage industry professional. And that does investigate a field reporting. Literally visiting homeless camps, detention centers and distress neighborhoods to ground truth to the data she studies, collaborating with other researchers and getting data from Fred, NAR, census and county level records. And like I said, I think you're most recent newsletter. They dropped last week talking about home sales in December, the retail credit situation, and the stress the consumer is under is something that many people are not aware of because we're being told that the economy's running hot. It's the best economy ever, but if you look under the hood, things are not all well from your perspective. So what are you seeing out there, Melody? Yeah, I know. I think you summed it up nicely. I mean, we've been seeing this under the cover's trouble for some time, especially in what I'll call government subprime FHA, when those student loans started reporting to credit again, it really impacted a lot of the people who should be forming households. And so you had people going from 750 credit scores to 550. And so very quickly, credit got cut off. At the same time, in the mortgage market specifically, guardrails went on the FHA program, which were being taken advantage of. A lot of fraudsters were taking advantage of it, but essentially you could just keep not paying over and over. And you would go get another workout and another workout. And so guardrails went on that program. So when we look at stuff in the aggregate, Melody, I think this is where everybody can have that false sense of calm because it looks okay, like, oh, home equity, that looks like that's great. Unlike the last time people will often say, but there's so much going on that's new that people don't understand. Like today, for instance, Clarna reported, right? And they had a loss and they are very much some of the people that use Clarna by now pay later are the exact people that we would hope would be out there buying homes. But unfortunately, they have to basically finance their burritos. And so you look at the use unemployment rate. I mean, so I guess there are so many things, so much weakness under the surface that almost no one is paying attention to. And so in all pockets of the market, be it in mortgage where you're starting to see the frequency rise and we're going to see that from here. You're actually starting to see the prime books get impacted and they always come after the subprime, when the layoffs happen. And the issue now is a lot of this lending was made on inflated credit scores and that did not include the student loans and things like that or those eviction moratoriums. And now those inflated credit scores are coming down with student loans reporting. So it's just a much murkier picture than what people. And I don't know how anyone can say anything positive. I mean, existing home sales last year were the worst since 1995 and we've increased population by over 20%. I mean, so this market is completely frozen. You had a lot of raged e-listers last year that couldn't get the price they wanted. And so they just took it off the market. But what you've seen since the recent Bitcoin route, kind of what happened there and the wobbliness in the stock market is inventory is flying to the markets. I had been coming off, but now it's flying on non-seasonally. This isn't the time of year you would typically, typically your inventory bottoms in February. So. Well, I thought it was interesting that you covered the Bitcoin price drop in gold and silver in this newsletter because I'm not sure if you caught on to this meme, but I think Bitcoin is a leading indicator of liquidity. Oh, yeah. It trades 24/7, 365. It's very easy to sell and get cash. And so if a liquidity crisis is pending, it's one of the first assets to go. And so that's what we've been talking about. In the Bitcoin space with this price drop of 36%, 48% since the highs of late October, early November last year, is that something's got to be wonky in the back of the system from a liquidity perspective. And I think a lot of the data that you highlight in your newsletter last week points to this, I mean, looking at credit cards spending in December alone, looks like people were tapped out of cash and really pulling out the plastic to do their spending around Christmas time. And then I think it would also be important to really dive into the new home listings and home sales in December because there's some pretty historic lows in terms of what's coming to market and what's actually being sold. - Yeah, so specifically on the new home side, we're gonna get results tomorrow for both November and December. And we've been going off, we only got October because since this is the one who prepares that, but on the existing home side, I mean, yes, a lot of people wanted to blame the storm, Marty, but California is our biggest housing market out there. And the storm came very late in the month. It was just, I mean, these were just really bad sales, like worse than January 2007, worse than January 2008. And again, the population is much higher. I think there's some things going on though that a lot of people don't understand, which is I think that the National Association of Rilters, these listing sites, the MLS, they're losing relevance. And so, I think that we're actually having, there are quite a few transactions that aren't being captured in their statistics because you had a lot of people, they did this back in the '82 in rates rose, is you had a lot of seller financing because people couldn't get approved at the higher interest rates. And so the seller would say, I'll finance this for you, those and selling home. So some of the transactions are just not being captured. A lot of them buy the investors as well. And so, you know, we're just, the housing market has always taken, the indicators are very lagged. The data's not real time because a lot of it to really get accuracy is pulled from county records. And that can be, there's over 3,000 counties in the country. And some of them believe it or not are not on any kind of e-record platform. They're still mailing stuff. And so, you know, I just say that because all those sales are horrible. I mean, they're just absolutely horrible. I think we are missing a component of the housing market right now with these private note actors that are out there, transacting not on the MLS. So I just kind of wanted to state that because I think people are going to be surprised when they realize how much inventory is out there. And because I talked to them all the time, they say, well, look, look at what was on the MLS in 2008. There were 4 million homes. And now we only have a million. And I'm like, yeah, but there have been studies that 50% of transactions aren't like, let's say an Austin weren't handled through the MLS. So we have, we're just, it's a very murky muddy picture that hopefully I have it lost everyone in those details. But what we are starting to see is median listing price. So that's the idea of the median of whatever the listing price was that has now come in negative year over year for two months in a row. It's now under 400,000 for the first time since 2022. You know, while the builders on the other hand, for their prices, they have been selling under the existing home price for almost a full year. And the last cycle we saw that one month, one month, in June, I think of 2006. And so you've got this, these crazy fundamentals where the new homes
are selling below 400,000 on median price. And then that's not even including the 50,000 of incentives are putting on top of that. And so we just got build or sentiment and it went down again as well. So I'm really looking forward to new home sell results tomorrow 'cause it'll give me a clearer picture. But at this moment last year was the worst we've had in over 30 years, which is insane. - Yeah, just anecdotally to confirm one of your DCs that I mean the house that I'm buying we did it off market. So it didn't hit in a neighborhood where you have a bunch of aging out boomers who want to hand it off to younger families. And so we were able to do that transaction directly. And I think there's a lot of that going on, at least where I am. - I do too. And then if you're not pulling from public record, then no one really knows what the median price is out there. If homes aren't selling that are, or they're selling but not being captured in the MLS, then we really have no idea what is going on out there. But what you can get a sense of, 'cause I track 85 markets is there's price cuts everywhere. They're just not selling those houses. They're just continuing to do price cuts. And so it's going to be one of those gradually then suddenly things. When you actually can get someone in the market to buy, but that's the thing, there's just nobody left to buy and the institutions are not interested at these price levels. - Well, this comes back to something else you covered in the last week's newsletter, which is not farm pay rolls and the revisions. And I think that's one thing that always makes me chuckle is you get the headline number and then nine months, a year later you get the revisions and nothing as verosy as it was originally reported. - No, and that just seems to be happening on every front. (laughs) - Right, and so I think, you know, just take the new home sales price for a minute. They shaved almost, they revised five years of history through the COVID and shaved $30,000 off of the new home price high, okay, peak. It was at 496, they revised and said, "No, then they didn't tell us why." They really tell us why. But now it was, the peak was 460,000 on the new homes. And just five years of what we thought with reality just got wiped out. And so that's the limitation, I think, of the data. And that's why I think you have to go look for yourself. And you also have to, you know, track non-traditional metrics because there's just, we're not getting the full picture out there. In any way. - Yeah, well, it's sticking on the jobs market too. I mean, you highlight that there's a bit of a jobs mirage with education and health services carrying the entire labor market. And you've come to find with health services specifically. It's a lot of that driven by over fraud. - Exactly, that's where a lot of those Somali jobs were. You know, that's where they sit. And so what happened after the American Rescue Plan is all this money went out to the municipalities and they created all these programs, like housing affordable daycare programs, whatever. And they employed a lot of people theoretically, although I think a lot of it was fraud. And so that's why you've seen that job growth. But what's happening now, Marty, is these municipalities have run out of money. And it's not coming. I mean, California is a great example of they are in so much trouble. Chicago, another example, they don't have any more money to fund these programs. And they're not going to get it from federal. They might get a little, but they're not going to get enough to sustain them. And so, you know, we're looking at a bunch of municipalities in crisis, which will impact those education and health services jobs, which is the only jobs that were created last year, really. - Yeah, and if you're not going to health service or education job, you're getting a second job, which is-- - Well, right, right. - And you know, that's the highest percent of workers holding two part-time jobs ever, right now? - Yes, ever. And the series, I think, goes back to the '60s. So, yeah, that's not-- so two part-time jobs just to make ends meet. I mean, that's insane. - Yeah. And then, I mean, we don't want to be too dimmer as sharework, but we're trying to still-- exactly what's going on. And you also mentioned private credit in the last week's newsletter. And I was actually fully enough, the FOMC meeting minutes from last month came out earlier this week. And private credit was an area that the board highlighted is something to pay attention to, and that is worrying them. - And this is another thing that's not tracked in the space. You have your old traditional hard-money lenders, which would-- it's like a personal loan. But they were very-- they were usually regional, and they would make you pay a huge down payment or an exorbitant interest rate to kind of cover their risk. What private credit did is they came in, and with they thought they're sophisticated underwriting models, they weren't that sophisticated. They just went off the credit score, basically. And so I've talked to people in this space that are freaking out because they know those credit scores were inflated. I mean, look at Clarna today. Like, that is-- we knew this was coming, because we knew that the numbers they were reporting for Delinquency did not add up. But yeah, and so you've got a ton of private credit out there, and the banks have lent to people like Tri-Color and those actors who have gone out and lent money, and they're not recording deeds. So we don't know if there's money lent against the house. And there are also many of them aren't reporting to credit. And so it's just a big-- and we know that the shadow market is about two and a half times bigger than it was during the last crisis. Yeah. And I saw a headline yesterday about subprime auto loan, Delinquency rates skyrocketing. And obviously, 90 plus day Delinquency rates on real estate or rising as well. I'm just wondering how much of that is due to the immigration policy of the last year and how many immigrants that were here illegally, but were able to get FHA loans and subprime auto loans, simply had to leave the country, which is driving that up. But regardless, there's still a code. And the wins can really track that. I've been trying to get good data on that, but there's just not really good data. Yeah. Well, you're talking about the 90 plus day Delinquency rates in real estate, specifically. And there's some sort of foreclosure game going on. Oh, the sub two. Yeah, I'll talk about-- so I'll talk about what's going on in Delinquency. So basically, when the guard rails went on that FHA law mitigation program, which was just basically an open teal to whoever wanted to come take advantage of it, that meant that we were going to see serious Delinquency increase because they are no longer eligible for some of these workouts, or they have to do things like make a trial payment. So let me give you-- I have one bar or one of my client books who went back six times and has been delinquent for the past two years. But nowhere near for closure yet, Marty. And so because all that government intervention and workout, and so that's all finally running out, believe it or not, and will run out over the next 12 months. And so that series of delinquencies going to go up, it will get a little bit of improvement. We always do in the spring with bonus payouts and tax refunds and things like that. What'll be interesting to track is how much. Because for auto, it didn't help last year. So we'll be watching all of that. But what you are talking about-- so this is something the mortgage industry has no ideas going on. It's called Sub-2, our subject to mortgages, and what these investors did is they would-- when you are in default, the server server has to record something called a notice of default, or a list pendants saying that you're about to be a complaint will be filed against you. So the investors will go research those, and then they'll go contact you. And they'll say, hey, listen. I've got a deal for you. I could take over your mortgage payments for you. If you sell me this house, and I could maybe give you an equity sweetener, or you could rent for me for a little while, and this investor is trying to find someone-- while they're doing all that, they're trying to find someone to buy the home from them. What's happening now-- initially, these investors would record those deeds. But there's this thing called a do-on-sale clause that if you sell your home, your note becomes immediately due in Owing. So what's happening now is these investors, as I knew they would, because they always do. They walked away. And now the borrower is on the hook, because they're still on the note. And so they're being-- for closure proceedings are going against them. They may not even be living in the house anymore, Marty. But this is a huge-- it's part of that private note shadow market that I was talking about. And I think this is one of the things that's kept delinquency lower. But people no longer-- when home prices aren't appreciating, you cannot get a buyer to come in and just pay ridiculous money for that house anymore. And so they're walking away. They can't make the payments. So there's just a ton of stuff going on in this market.
Well, and that's sub two, Carrie, the investors are walking away because they don't have the cash. Where are they just saying, hey, this isn't worth it. And we've got those things. Yeah. It's not worth it or they don't have the cash. Self freaks. If you've been listening for a while, you've probably heard us all talk about Bikki. It's a Bitcoin wallet built for people who want self custody to actually fit into their lives. Bikki is a private multi-sig wallet that removes the biggest point of failure in traditional self custody, the seed phrase. No ceremony, nothing to hide, and no single mistake that can put your Bitcoin at risk. We all know things get lost. I lose things all the time. Phones get replaced. Life happens. Bikki specifically is designed so your Bitcoin stays secure and recoverable without demanding constant attention or expertise because it's built for the long term. And herds is built in so your Bitcoin can move securely into the next generation. It's Bitcoin self custody built for real life. And for February only for you freaks, okay? February only. You got 28 days, not a leap year. I'm pretty sure. 28 days. U-listeners, TFTC listeners, and get Bikki for $99 using code TFTC99. At Bikki.world. That's B-I-T-K-E-Y.world. Use the code TFTC99. And you're going to get a Bikki for $99. So freaks, when you take Bitcoin seriously, you start with custody. You want to control your keys, avoid single points of failure, and make sure your savings cannot disappear because you or someone else screwed up. That is what unchained has been focused on since 2016. Unchained is the leader in collaborative multi-sig custody and Bitcoin financial services that keep you in control. They secure over $12 billion in Bitcoin for more than 12,000 clients. That means about one out of every 200 Bitcoin sits inside an unchained vault. They're model simple. You hold two keys, they hold one key, and it always takes two keys to move Bitcoin, meaning their single key can't access your Bitcoin on its own. Just resilient, chaired custody that gives you institutional great security while keeping you sovereign. Unchained also lets you trade straight from your vault. Access Bitcoin back to commercial loans, open a Bitcoin IRA where you hold your own keys, and set up personal, business, trust, or retirement vaults. They even offer inherent solutions built for long-term hodlers. Never, out for the highest level private client service with unchained signature and get a dedicated account manager discounted trading fees, exclusive access to events and features, and much, much more. If you want a partner that helps you secure and grow your Bitcoin without giving up control, go to unchained.com and use the code TFTC10 at checkout to get 10% off your new Bitcoin multi-sig vault. That's
[email protected]. I mean, for the private credit specifically, whether it's hard money lenders, these sub-to investors, and you can like commercial real estate, it's got to be, again, the Fed calling it out. Yeah. Last month, or the FOMC, it's becoming a bundling linklier that private credit is in trouble. We had what was a blue owl last year. Blue owl. Stopper d'emptions and one of their retail-oriented private equity gardens. It seems like all the cash that was printed and flushed into the economy in 2021, 2020, is not getting the return that there's a mess or so, everyone. No. Especially, there's so much private credit in real estate, like 20 to 25% of loans in private credit. I mean, if commercial real estate or private credit loans, and so, yeah, this is a dumpster fire. And I guarantee you that a lot of the people that are at these firms know how much trouble they're in, but they're not telling anybody. It takes a long time, as we can see. I mean, Blackstone, for instance, isn't a ton of trouble. And it's, but they can keep up appearances, but they're running out of time. They're losing enough on the commercial real estate. They're losing enough on their single-family rental business that I think we're going to start seeing impacts and breed, for instance. What are about them gating redemptions again as well, probably in the near future? That's been one of my sort of tinfoil hat theories, but Trump announcing that these investors can't buy single-family homes anymore and his $200 billion mortgage buying facility. I don't know if it officially launched, but he announced it. And they've already been doing it. They don't even buy in the MBS. Yeah, particularly with the former though, is like, is it just a slide bailout? You're going to say they can't buy that. Oh, it's a total bailout. Yeah, that's a bailout for them. Because I was in the room with one of them in September and he's like, we've been chasing price for a year. They don't get a home-stead exemption. So they, their taxes are much higher. Their insurance is higher. And so they can't, they are, as soon as these long-term rentals, the lease is expired. They're rehabbing them and selling them. And which is why you're seeing price declines in places like San Antonio and Atlanta in Tampa because you have very large institutional presences in those cities. And so yeah, it's a bailout, Marty. I mean, that's, I guarantee you, this is phase one. Oh, you can't buy these homes anymore. Phase two is like, hey, you know, we'll give you a deal if you sell these homes, you know, through one of our affordable housing programs. Well, that's when I was singing it. Maybe they have like a BTFB facility. We're going to say, hey, we'll just buy, we'll buy these assets apart for you. I bet we'll get there. Yeah. In the house. So where, where do you think the rubber meets the road and this becomes obvious to the market? Oh, I don't know. You know, the fact that we're in an election year, like, you know, I, I think that there is, like, there's a, it's accumulating the awareness. Like, you know, it's no longer just Florida and Texas. Like California is on the board. Like it is on the board. You're starting to see a deceleration in the Midwest and Northeast on their home prices. And I think pretty soon, the Midwest will turn because they, they just, I mean, investors descended on them because they were the last place you could get a decently priced single family home. But I think it's going to take till the Northeast has some sort of awareness for there to be national awareness. And the Northeast has a ton of problems around their demographics. And you know, those census updates are huge, showing everybody they didn't quite get the population gain that they thought. And, you know, the Northeast, very low owner occupancy, which means you got a lot of mom and pop investors, most of which are boomers who are aging out and will be, I mean, what's really interesting, Marty, I'm seeing in the cities I track is that the, the rate of folks who are deceased property owners, like so you can track whose disease is, I mean, in some cities, up 25% year-to-year. And so, you know, this is going in in trial, Schwab did a study and said 70% of the time, people who inherit property sell them. And so all these things take a little bit of time. It takes time to get through probate, but I think the demographics are going to really start to become obvious in places like the Northeast and Boston. And actually Philly and Pittsburgh both have been showing price weakness. And so, but I think until the Northeast falls, there probably won't be large scale awareness. But with the price cuts I'm seeing, you know, once we can get activity in the market, we are definitely going to see that suddenly, you know, hit the gradually then suddenly. But we could skate for another, another selling season based on, you know, hope, and promises. But I have a feeling we're going to see some disorder in this selling season, especially in places like Texas and California. Do you think this is necessary? Oh, yeah. I mean, yes. I mean, if they'll let it happen, you're going to try everything, but everything, there's just, there's a point where everything doesn't work anymore, you know, like everything they've tried. Like, like I love to talk about, they bought mortgage back securities back, you know, in 2009. And, you know, prices just kept plummeting. And it didn't do anything. Like it created a little re-fi boom lit in 2010. But now we've got people like the Fed reported over 43% mortgage re-fi rejections. And so people can't even, you know, they can't qualify for a refinance. It's the highest in their series, you know? So it's just, it's just a slow burn that is, it's gaining speed and gaining traction. But if we could get transactions, we would see true price discovery. And yes, it's absolutely necessary because, you know, household median income is not even the same ballpark as, you know, median homes prices. And so who's going to buy these? It's not going to be the institutionals. It's not going to be your, your, your, you know, your cohorts coming of age. I mean, unemployment rate in the 18 to 24 is insane. So like we're not going to form households until the affordability problem is fixed. So yeah, I think this is necessary. Yeah, then you have the AI boom happening, which is telling the Gen Z and Gen Alpha, don't even try to get a job. Right. Right. As if their lives couldn't be more depressing, you know, like it's just, it's kind of, yeah. It's really, it's really not good for that cohort right now. Yeah. Well, you have the whole K-shaped economy meme becoming more prominent. I think it's becoming more confirmed. It is a, yeah. It's not easy out there, particularly for the younger generations. And again, going back to the demographics and push coming to shove with boomers aging out and just factually dying out as well. Right.
flood of supply that just if you're just looking at the math and it's due to hit the market is going to be pretty significant. And this goes back, I mean, this is something I've always been curious about when new home builds to when you consider the quality of new new builds compared to older builds, particularly if they're built like 50 years or longer ago that they're actually sturdier like the house is more buying is very old and I feel more comfortable in that than some of the new builds coming up and this whole supply meme that's been going out there you have podcasters like the all-in guys and the president and the administration saying we just need more supply to bring to bring prices down. I don't think that's the case and on top of that the new supply is not a quality quality build at the end of the bill because who was building it and you know it was so contractors of so contractors but they were illegal immigrants. That's who and often I you know on these new build sites, Marty, it's it's it's it's a little scary like you're you're see like we did one video where we just went around got the Jack Daniels bottle the Madella case empty cases like the empty beer bottles that were just all over I think it was Lennard job site and so you know the quality is horrendous there just wasn't I mean all these thousands of new home communities I went to you didn't have these did not look like professionals building these homes. Yeah. And nor were they managed by professionals on site. Yes so how much of like the lack of new home sales is being driven by people looking at these people I'm not buying this paper mache box. Right. And then what is the best part of it? What is the exposure to these? Yeah and not only that they built luxury it's like who are you building for like you know I know in 21 we saw wages rise but not like something crazy but that's what happened is all the builders went out there and built for the California and New Yorker that was coming to their town and built luxury apartments and all luxury homes like these giant some of the spec homes I've seen out there just blow my mind like 13 million dollar spec house 25 million dollar spec house meaning they didn't have a buyer they just built that house and it's like this massive luxury structure that you can go in all the 85 markets I track and you can see this luxury sitting empty there are not enough people to buy those homes and so I think you're going to have there's going to be a lot of bulldozing when people really finally start to deal with the problem but we're far from that right now unfortunately like people people are still believing that it's an inventory shortage. I mean we talked about this last time around but when I was in Austin there was one of these luxury builds around the corner from us we moved in 2021 if finished construction I believe in the beginning of 2022 and we left June of last year was still sitting there up for sale. Yeah and what's crazy is a lot of these cities are still building them like Phoenix I'm just like you people are nuts I mean and they're everywhere and it's so weird it's like these developers they never just drive around the town they never just even go two blocks over like Nashville's another good example if you if and when you go back like there's a attached to downtown is just like apartment on top of a part I mean if all of those if 50% of those apartments and they're all new we're filled you would never be able to leave your house because the traffic would be so bad the congestion because they just built all these things on top of one another with no parking and then that's the really sad thing about a lot of this is that people just you know set new builds down and cal pastures wherever they could find you know they could build they didn't think about infrastructure and so you know and I've seen some really sad small towns be destroyed across the country due to like okay you're outside of Raleigh oh that's going to be the new apple headquarters oh no not so much maybe not you know whatever and so and so they went to these little towns and just like destroyed them like bought up all these older homes and fixed in flipdum or just you know put those new bill communities but there's no way to get in and out of these towns like it's all you know too lame it's just it's so it's so sad very high time preference the describe it as the high velocity trash economy where you're just building the build to hit your absolutely absolutely we think the knock on effects of all this will be well we're gonna say crime increase I mean if that I mean that's that's an effect because the vacancy out there is a massive problem that nobody's talking about and you know it's only a matter of time when all the homeless and Austin figure out you know 10 miles south there's an empty new build that nobody's policing it's like why don't we just go set up shop down there um you know but I think you're seeing it already in cities like Dallas in the downtowns they're just they're they're terrifying I wrote an article for Unicus research last week which was called creepy is not cool because these downtowns are creepy I mean they're just creepy you don't want to be in them which means they're never going to be able to get you know they're not going to be able to attract new business down there either and so I think you're gonna have an increase in crime um you know we're already seeing an increase in homelessness um and so but later down the line if you're not in debt uh and this is really important don't get into stupid debt um and you have a job like you have a job maybe you're a plumber maybe you you know instead of going to school you went and did a trade um then you're gonna be in a good position to get a home and so that that's the the long you know after a few years that's the effect and in some of these markets it'll be before then um as well but yeah I mean we're looking at I think we're gonna be looking a lot of municipalities like filing bankruptcy and I think they'll probably be begging for help from the federal government to deal with these vacant homes um so and because a lot of these homes were bought with all cash during this last cycle which means they're not sitting on a bank's balance sheet which means you're not the grass isn't getting cut uh the pipes aren't getting winterized the mold's not getting removed uh so that means all kinds of issues I mean I saw it when I managed a fault during the last crisis I mean these homes get into the worst shape um and you almost can't even recover them because you know they're just in such a state of disrepair yeah when you sit downtown Dallas it's great like so what do you mean specifically what are some examples so so uh what's crazy about Dallas uh is they've got these massive um you know high rises uh commercial real estate completely empty and on the back of it you see a stroller and evidence of homeless that have been living there um and then right next door they have this massive high rise that's being completed office building but if you walk in downtown Dallas like it's just it's a ghost town it's a ghost town um and and it's creepy because you're walking around it uh you know you're seeing these what looks like homeless camps in downtown Dallas so uh you know that that's and but this is ever I mean it's every like San Antonio you know a very similar situation I when I was in San Antonio I saw somebody OD right in front of us like we were in the truck like filming downtown right next to us just OD I mean it feels as if most people haven't been to their downtown in a very long time because they just are unaware with how how creepy these places have become because they're just empty so freaks this rep is brought to your regular friends at silent silent creates every day fair day gear that protects your hardware we're in bitcoin we have a lot of hardware that we need to secure your wallet amid signals that can leave you vulnerable you want to pick up silence gear put your hardware in that I have a tap signer right here I got the silent card holder replaced my wallet I was using Ridge wallet because it secured against RFID signal jacking uh silent the card holder does the same thing it's much leaker fits in my pocket much easier I also have the Faraday phone sleeve which you put a hardware wallet in we're actually using it for our keys at the house too there's been a lot of robberies they have essential Faraday slings Faraday backpacks it's a bitcoin company they're running on a bitcoin standard they've a bitcoin treasury they accept bitcoin via strike so go to slnt.com/tftc to get 15% off anything we're simply just use the code tftc when shopping at slnt.com patented technology special operations approved it has free shipping as well so go check it out suffreeks this rep is brought to you by good friends at lago's finance Celsius block by ftx they took your bitcoin and gambled it away lago's camp because they never hold it non custodial lending on bitcoin's base layer your keys your collateral is verifiable on chain go to lago's.finance film that tftc sent you do you think despite the repositioning by the administration that everything's all good economies hot they understand these these problems exist and they're just I think you described the saberaddling between uh President Trump and the federal reserve is k-phob um you think in orderly the projection of everything is is all well and great is k-phob too and they know things are not all well under the hood and they're just trying
to narrative craft until they can find an excuse to actually flood the system and more liquidity. Yeah, so you know, this is a question I just I obsess over. I can't, you know, it's like they have to know some of it. And if you know, but I have a feeling they don't know all of it, because I talk to people in government now and about their cities and say, "Did you know this? Do you know that? They don't know." You know, because that's what's happening now is I'm getting contacted by more policy-focused people who want to talk to me about maybe solutions. Finally, that's happening, but they aren't aware of how much inventory they have. And in places like Texas and in some unincorporated areas across the country, you didn't even have to file permits. And so a lot of local leaders don't even know. And so I think it's funny, like Pulti followed me for years before he got and you know, he would share my stuff. And all I ever do is talk about the inventory shortage myth and you know, but the day one into the administration, he, you know, sang a different tune. And I actually know the CFO of Freddie, he was one of the last people's standing because they went in and gutted the executives at Freddie. I mean, he was my boss during the GFC for a certain, he has to know, I haven't spoken to him, but there are just so many clear tell-tale signs if you are in the know. And so it's weird and mortgage specifically, like people who originate the loans never talk to people who service the loans. And so the originators never realize what's happening on the back end. And so I think we're still in that part of the cycle where the origination narrative is kind of driving the narrative, but in servicing, when I talk to the big servicers, they know what's happening. So I think it's probably a combination of they know, and but they don't know the scale. But if it were me and I would never do this, I don't want to be a politician. But if I were a politician, I would do probably what they were doing, like just say whatever, like what is it? You know, you're just he's speaking to whatever interest group in that moment. And but you have to look at what the policy is. And when they put those guardrails on FHA, that was a real action. And that's going to have real consequences. And they have to know that delinquency on FHA is is unbelievable. And so there've got to be people on that side of the House that understand that this is really, really bad. Yeah. Is there anything similar going on to explore as just vanilla bank loans? I've been reading Bill Morland's bank flag data. And he he was saying that they're just disguising sort of their exposure to these delinquent loans by some sort of 12 month window that they're able to push it off the balance sheet. Yeah. Looks like it's better than it actually is. Yeah. Yeah. And and Fannie and Freddie in FHA hasn't done as much of this recently, but they do these things called non-performing loan sales. And so they'll literally take their delinquent book and sell it and then turn around to you and say, hey, our delinquent sees only 0.67% will wear those loans to go. Okay. Well, they went to private hedge funds who then turn around and sell it to individuals who don't report to credit. And so, you know, like we just we just don't have a very clear view of what's really, but yes, that the, you know, I tried to help people understand that what they did is instead of waiting for the crisis, they took these, they took the old loss mitigation programs from the GFC and they put them on steroids and they took away all the requirements and things you had to do because back then you had to virtually re-underwrite the loan. Well, they said, you don't have to do that anymore. You don't even have to ask for their financials. I mean, this is crazy, Marty. I mean, that's crazy. Like you don't even want to know if they can pay. Like what? Like why would you? It's all a game of extended pretend. And so we've had, if you think about it, we've had enough like the same amount of workouts that we had after the last cycle times about two or three. And that's what's kept us skating for this long. And now that stuff's running out. So it's just like what Bill talks about. Yeah. And it's funny too. I've been talking about extended pretend. And I don't know if there's one anywhere, but you're mentioning Bill Pulte, the 50 year mortgage that was floated in December. What was your reaction to that? Because we have a certain experience. Yeah. I didn't want to talk about it, but like literally everybody. I got so blown up. I mean, my life went crazy for a couple of weeks, but I just like, this is so stupid. I can't even talk about it because, you know, by year 11, if anyone in this country like knew what an emergization schedule actually looked like, they would not borrow money. I mean, but we're not taught that in school. But by year 11 of that loan, you would have paid $270,000 in interest. That is what a median home price should be. Our median home prices should be around that $250 mark. And so that's just nuts. That's nuts. And it's just debt slavery. It's just another form of debt slavery. And believe it or not, they had them back during the last crisis as well. Like some people do, you can do them in California. And they're doing what's called a 40 year modification right now. And it's not helping anybody because basically your payment goes down by like $20 and then you add 10, 10 more years to your loan. I mean, I just hope people understand, please don't do this. Like just please. That's just you're going to be a slave forever. Well, you see this extending pretend not only a 50 year mortgage, but I'm not sure if you caught Google wanted to issue 100 year bond. Yeah. I'm there. Yeah. Sorry. Yeah. I did. To fund their data center expansion. People look at that like, oh, look, long term financing. It's like, no, that's we need to get suckers at the table to give us cash. We can do this and push our. Exactly. Push our payments out that century. Yeah. It's just so nuts. Some of the things you see going on right now just make your head hurt. I mean, you know, but a lot of it is just, you know, it's just a lot of delusion still. Well, what are your thoughts on this data center expansion? How does it affect your commercial real estate? Yeah. I mean, industrial is already they their vacancy is increasing. I mean, what I saw across the country was a lot of new data centers for sale and for lease. And you know, although I, you know, I forget how to say his name Torsten Slok or whatever from Apollo, like he has his chart out there that shows that kind of data center construction peaked in 2023. So I mean, Marty, I think we might be at a point where it's already happened. We're just not aware. Like, like the slowdown is already happening, even though they're all out there talking about building, you know, data centers on the moon and blah, blah, blah, I think that's just the somebody give us some money for ridiculous idea kind of thing. But I think that so two things one, social media use peaked in 2022, you know, I think the numbers from Open AI, you know, they're going down. Like, I think, I think this is all peaked already and we're just, we're still dealing with, you know, kind of the delusion. And then the second thing that's going on is, you know, the public is they're pushing back on this massively all over the country. More torrents, people showing up furious at city council meetings because they're like Tristee bills are going up. And this is, I mean, you know, DeSantis has gotten on this early. And then Bernie Sanders kind of got in and now the Democrats are, this is going to be a huge midterm issue in my opinion. And so I think we're not going to have all that construction. I think that we're just still running through the, you know, the, you know, the mania mode right now. But that in reality, I think they all know that that doesn't even make any sense. We should be focused on if we believe in this technology, we should be focused on how to scale it, you know, like how to how to get the kind of power that wouldn't just take down the entire grid or whatever. But I have a conspiracy theory on this one that I actually believe a lot of what was written into the BBB is about fortifying the grid versus, you know, maybe construction because I mean, construction for a private sector because I, you know, the remember when they did that big infrastructure builder in COVID, like, not what happened, like nothing, you know, and it's like our grid is not in good shape. And so I don't know if you saw the tweet by Trump before the storms that he was going to tap data centers for power to shore up the grid. And so I think that some of this might actually be a way to sell infrastructure improvements wrapped in a AI mania narrative just to, yeah, actually, what it would be mad at that, like I think it's critically necessary need energy generation capacity expansion when you transmission expansion to your point the grid is.
not in a great spot right now could certainly be better. And we've seen this in Bitcoin. I've been in Bitcoin mining for almost a decade now. And that's one thing we do very well is demand response. And so like in ERCOT, the TVA where you are and mining operations that we're in certain price programs that we get a good deal because when this happened three weeks ago in the store and when demand spikes, we get asked to shut down. We're able to send that electricity back to residential consumers. - Yeah, that's kind of cool. I mean, you know. - But that's specific to Bitcoin. You can do that with Bitcoin miners because Bitcoin is a distributed system. And so shutting down mining operations in Tennessee because it's called doesn't disrupt the Bitcoin network. It may slow down block production by a few seconds to a few minutes, but that's not gonna stop transactions from ultimately being processed. And so you have in a unique use case within Bitcoin mining where you have this sort of responsive controllable load that can turn off in a moment to notice. But when it comes to the AI, particularly if you're if you're training models and running inference like those operations can't be disrupted. Bitcoin is called disruptable load. That exists. And so if we are gonna build out these data centers in this infrastructure, I think the Bitcoin mines need to be, there are the AI data centers need to be paired with Bitcoin mines that provide that disruptable load to send electricity back to residents when they need it when demand spikes. - Right. I'm actually gonna be doing a trip here soon to stargate in a bunch of the different data centers in the South. And you know, 'cause I wanna see what's really going on there. I'm, you know, we can't trust what we're being told. That's what, you know, my conclusion and the way that I really understand what was happening in housing was I went out and looked and so that's what we're gonna do. Let's go look at some of these big sites and see, you know, the ones in Memphis, I mean, that's gonna be a very interesting case. It looks, you know, they're getting sued. So, you know, I just think there's gonna be a ton of pushback on these. I saw a Dowd tweet something funny that I actually believe in that I think what they're doing is spurring this anti-technology movement. Like people are saying, I mean, I don't want smart technology in my house. I don't, you know, I don't wanna be woken up in the middle of the night when Amazon AWS goes down and my bed like, holds me out of bed by raising up or suddenly it's 150 degrees in my bed. Like, and these are the types of things that, you know, I just, we don't need that. That's just stupid. Like what does that do? And then, you know, these appliances that they're all smart, they die in like two years, the software dies, like whatever, you know, so there's no quality. So I think actually what we're probably gonna see is kind of the rise of a, you know, no more. I don't want this stuff, you know. - There's a bunch of Uncle Ted accolades coming out of the woodwork to say. - Right. - Right. (laughing) - Yeah, it's a, I'm very big anti-smart home guy. But again, I've been using AI at TFTC to help just automate some stuff on the back ends, but extremely helpful. So, to your point, it's sort of spreading the needle and figuring out what the appropriate trade-offs are, and how to use this appropriately. Then I'm sure you saw yesterday that sort of White Hat Hacker research group found out that the company doing KYC AML for OpenAI is just automatically piping all the information to the government. And you have this surveillance panopticon that is being erected behind the scenes alongside this AI technology. And there's a right way and a wrong way to do everything, including AI, and all layers of it from the energy. Like to the data center, discussion and the pushback against it. We've learned this in Bitcoin mining too. And I think Bitcoin miners actually have it worse because the machines create so much noise. You have to be very specific with where you plot these data centers down. This should be like in rural areas where you're not going to disrupt residential neighborhoods because the sounds too loud or just ugly in eyes sore. I saw earlier this morning, it knew Brunswick. I'm not sure which state, and the citizens there were successfully able to convince their city council that to deny a data center construction. But the point being, it's like just trade-offs is a right way and a wrong way to do it. I think AI is figuring that out. Bitcoin miners figured it out beginning of 2020, 2021. You got to be very strategic where you plot these down. And unfortunately due to the state of the grid and generation capacity, here options are limited. But I think we need to get to the base of this industry, which is generation capacity and smartly plop down generation in areas where it's not going to disrupt residential consumers. - Yeah, I wish we were having conversations about what we want this to be. It feels like it's so much hype, there's not really any like, okay, what do we really want here? And the techno cult group, (laughs) I can't know, the technocracy, but I put cult in the middle of it. They have very things that I don't think any of us really know and understand as their angles. What is the vitalism movement or whatever? - Transhumanism. - Yeah, transhumanism. Our biggest problem is that we die, these things and very tower a babble type stuff. So we're not really seeing down and talking about what we want this to be, like the larger society. The tech rows have a very specific idea. And I just wish we'd have that conversation, but I'm just going to give you a funny example for people to like how much of this is narrative, how much is reality? Like, you know, when that software route happened last week or a couple of weeks go time, it's just, I don't even know anymore. You know, it was because theoretically and the topic came out with this legal and marketing service. On the same day, I was talking to someone at a conference, a builder conference, where the attorneys are now making bank because they're suing people that used AI for contracts and they're incorrect. And in fact, I was an expert witness on a case where the guy called me in to review, he filed a complaint, he used AI to file the complaint and I had to go to him and say, "This is all patently false. There's not a single Iota of evidence of what you claim in this complaint." Well, no, the letter said, and I'm like, "Bring up the letter. What did the letter actually say?" And so there was this moment where his brain is just, you know, and he's told me, 'cause I'm a skeptic. I believe in certain aspects of the technology, but I think the hype is crazy. And so he's like, "You're wrong on AI. "This was two weeks before." And then, you know, basically his entire case was, it was not a single fact was correct in the complaint. So, you know, we're just not there yet. And I say all the time, you can believe in the technology, not the hype, but we're not having real conversations about it in my opinion. And what I saw in corporate America, is they don't have the gumption, they don't have the stick to it, to it'sness, like the, you know, perseverance to actually see any of this through. They give up and they send it offshore. They send it to India, like they just give up. Yeah. It's really hard work. Yeah, you have to, it's not out of the box, like some Jarvis Lake Wizard, they can do everything for you. You have to know what you're doing, you have to know what mommy's, do what specific tasks the best. Then you have to check the work, too. Yeah, you gotta check it out. Yeah. Well, that's what, I mean, my biggest worry, talking about 10-foil hat, like in "Spiracy," like tying the Epstein files into this, I worry about like, a Higalian dialectic situation being put forth where everybody's like, "Look, it's all corrupt. The Epstein files are proving this. We need a solution." And then the transhumanist tech bro's coming to be like, "AI." And we get to minority report, you know. And that's the solution everybody welcomes it with open arms, because they point at the Epstein files and say, "This is a pouring," which obviously objectively it is, but they get, that's how you get the antichrist. Right. The fake solution. Yeah. Yeah, no, I mean, I worry about that, too. And I worry that, you know, we are the noise out there is so massive right now. You know, it's just like, dialogue, conspiracy. And I don't mean like conspiracy, like that it's, I think we can all realize now that the people that were called conspiracy theorists, were just the ones paying attention, you know? Right, yeah, exactly. And so, I'd, but just see a amount of information we're getting, like the, I mean, it's just like, it's, there's a good theory out there for everybody right now.
to kind of keep them distracted. And I honestly think that's to keep them distracted from what's going on in the economy. - Yeah, sovereign individual predicted this and then I need the noise, the signal ratio is gonna, you know, so out of sync, it's impossible to discern unless you have your facilities about you and your faculties about you and are able to actually take the time to filter the signals through the noise. - Yeah. - What I'm bringing this back to housing before we get too far down the transhumanist techno rabbit hole, I mean, the demo of this podcast is interesting, it's a bunch of people older than me. It's our core demo is older than me. And so basically it was what you're seeing in the real estate market, our demo is like older millennials, Gen X and boomers, what would your advice to them be particularly in the older generations that are sitting on a bunch of real estate and trying to take about what to do? - I think you have to list it. I mean, just go ahead and list it. And just, you know, if you think that you're gonna be selling in the next couple of years or want to sell, I think you should go ahead and get it listed because I think all of a sudden at once, you're gonna be in the middle of a fire sale. And, you know, it'll come later to certain places and sooner to other places. And that's what I really try to talk about. But, you know, just list it and get a more realistic expectation of what your house is probably worth. And to people that can afford it, I say, go get an independent appraisal, not to do with any loan or anything like that, but just pay for an actual independent appraisal. Does that system and is lying to you? It's not based in reality. It's not a helpful comparison. And so it's just, it's not a lot of disservice for people, you know. So if you have real estate, you think you're gonna sell in the next two to five years, you may want to consider listing it or getting a real appraisal. And then, you know, I would say for those that want to buy, like, you know, if you're aggressive, there are deals even now out there, but it takes homework. And I think that, you know, during COVID, we all got used to, you know, not doing a lot of work for things. And so you have to be aggressive. But yeah, you know, to me, what's gonna happen here, because of the silver tsunami is housing is going to become boring again. And it's going to correct to a point where it correlates to the median income, you know. And they subsidized this market to death, like they have littered, you know, so people talk about, oh, what about this new bill that just got passed? It's like, it's just more of the same. And most people could get $25,000 in assistance for down payment in their city, like all over the country already. And so they've brought in everybody they can into the mortgage market. I mean, it's just dead instead. Like rates went down massively last week, Marty. I mean, a week and a half ago, purchase applications went down this week. I mean, refight went up, but not purchase. So rates aren't gonna do it. Well, you're certainly not seeing rising wages. So really there's one option out of this, you know, and that's home prices have to correct. And so if you're banking on that equity for your retirement, you know, don't be the last one out of the door. Like it just, you know, but if you're, this is your first home and you think you're gonna be here for the next 20 years and you don't have to worry as much about this kind of stuff, you know, you wanna have reserves on hand for sure. In case you lose your job. But, you know, you've got a different goal. Unfortunately, probably about 40% of the housing market, though, is speculation. And their goal is, you know, yielding, rising home prices and caching out that equity to keep the party going. So, we know on that last note there, like how, how's the Airbnb economy, all those Airbnb wizards who emerged in 2021 and 2022? Are they tapped up? Are they fire sold yet? Or are they still holding on? They're so a lot of them are fire selling. You know, it was funny as they made a transition for a little while to like, the whole narrative would be, get out of real estate, get into Bitcoin before, you know, we kind of saw that route in April or whatever. But, yeah. So, they're coming to market and like, in some of the more crazy markets, like severe availability, like you can see, the distress is bad. And they just built these homes that make no sense, you know, for families of 15, you know, that's good. It's just not, and then places like San Diego, you know, it's just a full-on infestation. And so, and Austin and all, so they're coming to market and I think they'll start, you know, as we continue to see kind of persistent downturns in travel and that kind of thing that, that's just going to accelerate. And because these things aren't making money and they're a headache. I mean, being a landlord is a headache. And so, and Airbnb doesn't care about you at all. Like, they treat you like dirt. So, they're coming and you're seeing these like motivated seller and, I mean, and you're just seeing crazy, crazy homes should have never been built, come to market in these, in these, in these vacation spots. So, yeah, I'm thinking of the Airbnb we stayed in when we visited Austin when we were looking for a house in 2021 and I don't think you could ever sell that to somebody who would actually like want to live in that as their, their residential property. - Did it have a theme? - It did, it did. (laughs) - My favorite is the bananas theme and Nashville that property. That like, there's so many of them though. Like, there's the Barbie castle. I mean, there's so many themed Airbnb's. - I mean, it's, I think it's all this is just an indictment of the federal government, the central bank's just pretty money. Like, you become deluded into believing that up in an a themed Airbnb is a good idea. - Right. - So the state of all the business. - Right, right. And I agree, I totally agree. And I just, what's crazy is, and you know, the other thing though I try to remind myself is when I just go out into the world and I interview people on the road or Uber drive or what, they are way more aware than Fin Twitt of what's going on. And so I just kind of try to tell myself, okay, we're dealing with a certain group, select group out there in financial media that is, you know, a lot of them are in the ivory tower of some sort and they don't really understand what's going on. But the regular Americans do. - Yeah, yeah, and two years ago it was completely obvious. I just didn't tell you about it. - Mm-hmm. Oh, exactly, yeah. We could have never seen this coming. Oh, Kidoke. I mean, it's just math at the end of the day. I mean, the problem is, you know, most of our data is corrupt. So we can't even get to the real math. - Yeah, is there a fix to that or something? We just have to deal with. - I don't, I mean, surely, right? Like, you know, this company placed her AI can tell you how many cell phones are in one, any one city at any time. Are you telling me we can't really figure out how many houses we have in this country? I mean, I just don't, I don't get that. Like, and so, so this woman I met in Australia, did a really interesting study. She used the utilities. She used like the water company to really get through inventory. And I try, I've gone to a couple of different water boards to try to do that. And it's harder over here than I think over there. But, you know, it's just, we need real data. But no, I think that we are in full, they are just shoveling it right now, just shoveling it. Like, none of this is true, accurate at all. And so I hope there is a, I mean, I hope that we, I hope that more people start standing up and showing up at their city council meetings and saying they're sick of this and that. And, you know, but it's gonna be us having to take responsibility, in my opinion. You know, that's funny to, we just recognize this. I'm a bit quite obviously focused heavily on CPI and I'm guilty of it, I don't know, but my hand, I'm guilty of it myself to a certain extent. I like, Dorn Biden, you're looking at the inflation rates. You're like, oh, they're under reporting. Those are trying to mask inflation. And now, which Trump inflation rates coming down, everybody's like, look, look, it's working, it's working. It's like, well, the metric was manipulated under the prior administration, what's to make you believe that's not manipulated under this one. - Right, right. - What can you believe? What can we believe these days? - I think what you see, you know, and even then, like that's kind of funny. I remember after Helene, people would argue with me about something I'm reporting on that I'm, that I saw it right in front of my face and they're telling me I didn't see that, you know, like, but I did, you know, and I have a picture of it, but it's still, so I mean, I think that we're at a plate where it's just, it's what we can see. And then sort of trying to get the data. I mean, I think that that's what I really try to do is like, Okay, this picture is
in front of us doesn't make sense. So how can we put one together, like from the outside, like frame a picture of what's actually happening? And I think when you can do that, when you can kind of try and get the data and then you can verify it by what you see with your own eyes, I think that's how we, you know, can sort of believe some's true. - Yeah. Look out for the BTFP program for the, - I know. - For the private equity guys in their houses. I think that'll be, I think it's a slide roundabout bailout. - I 100%, I think the same about the Trump homes, that's a builder bailout right there. I mean, they're gonna biometa a certain percent of, you know, a median, like adjusted gross income, like they'll say, okay, you need this to come, I'll buy it from you, 25% less. They'll put some price floor on it, actually, for these builders and that is a bailout. But you know, these things tend to, once they get going, there's, you know, they can try and stop them, but the market force just takes over. - Well, we'll be observing, we'll be watching, we'll be reading your newsletter to follow along. - Thank you. - Hopefully we can catch up on this at some point later this year. - Absolutely. It's gonna be an interesting spring. - It really is. Melody, thank you so much. Everybody, make sure you go subscribe, M3_Melody on substack. We'll link to that in the show notes and we'll do this again at some point later this year. - Thank you so much, Marty. Thank you. He's a lot freaks. Thank you for listening to this episode of TFTC. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there. Also, wherever you're listening, where that's YouTube, Apple, Spotify, make sure you like and subscribe to the show. And if you can leave a rating on the podcasting platforms that goes a long way, last but not least, if you wanna get these episodes at day early and add free, make sure you download the Fountain podcasting app. You can go to fountain.fm to find that $5 a month get you every episode at day early, add free, helps the show, gives you incredible value. So please consider subscribing via fountain as well. Thank you for your time. And until next time. - Giii.
PodcastTranscript AI